What’s the Current Value of Credit Card Points?

Dave Grossman dedicated seven months to meticulously planning his dream honeymoon, originally set for April. His itinerary included flying business class on Qatar Airways to the Maldives using miles, enjoying a six-night stay at the Waldorf Astoria Maldives with Hilton points, a week in Sri Lanka, and returning home to New York in the luxurious Etihad First Class apartments. Grossman estimates that the flights and accommodations he secured with miles and points amounted to nearly $40,000.

While Grossman may not represent the average credit card user, as he manages dozens of cards strategically to maximize rewards, his experience echoes that of countless travelers affected by the COVID-19 pandemic. He is the founder and editor of credit card rewards websites MilesTalk.com and YourBestCreditCards.com.

The competition among card companies vying for his business has also been impacted. Although it's challenging to measure the extensive reach of the credit card rewards industry, it is undoubtedly significant, particularly for travel brands. For instance, when Delta renewed its partnership with American Express in 2019, the airline projected an annual revenue of $7 billion by 2023 from the agreement—just one airline's perspective. Card issuers purchase points from airlines and hotels to offer to their members. In April, Hilton revealed it had sold $1 billion worth of points from its Hilton Honors loyalty program to American Express. However, with travel nearly at a halt and a steep drop in overall consumer spending, the credit card industry is adapting its strategy regarding points and rewards.

Cards that were once all about travel and dining are now, like the rest of us, focusing on life at home. Airline cards are now rewarding users with extra points for grocery store purchases. Hotel-branded cards that previously offered hundreds of dollars in resort credits—designated for spending at specific hotel chains—are now allowing everyday restaurant takeout and delivery expenses to be counted toward those credits. Cardholders can now receive credits for their cellphone bills and Netflix subscriptions, or apply monthly Uber ride credits toward Uber Eats food delivery instead.

“Everyone is hustling to provide grMytour value,” remarks Benét Wilson, credit cards editor at The Points Guy, a site focused on travel and loyalty. “They aim to retain customers and prevent them from ditching their cards.”

Their concerns are valid. Annual fees for premium travel rewards cards can soar into the hundreds. These costs are easier to justify when using points to book a luxury suite in Bali, but may feel less worthwhile when using the same card to buy essentials like toilet paper. Industry analyst Ted Rossman from creditcards.com was taken aback by the backlash when Chase Sapphire raised its annual fee by $100 to a total of $550 in January. “I received feedback from many who already saw this card as a splurge, and the extra $100 made a significant impact on them.” In light of COVID-19, Chase has begun offering $100 credits to help mitigate this increase.

Acacia N., a marketing manager based in Los Angeles who prefers to keep her last name private, is reconsidering her high-annual-fee card. While her points won’t expire, she’s not satisfied with the current benefits tied to travel. “The steep fee now includes Lyft and DoorDash credits, but I’m not flying, can’t really use Lyft right now, and I refuse to support DoorDash or similar services until they improve pay for workers and restaurants,” she explains. “I’ve been accustomed to accumulating a lot of points for our honeymoon, but I’m questioning if the $450 fee is justified without the ability to travel or dine out as we used to.”

According to Rossman, this indicates a tipping point regarding the high fees associated with premium travel cards. “As more people face unemployment and reassess their finances, we might witness increased pushback,” he notes.

More than a third of American consumers indicate that the primary reason for choosing one credit card over another is the type of rewards it provides. Additionally, 25 percent selected their preferred card based on a higher rewards rate, as per data from Business Insider Intelligence.

“I typically reserved my card for travel or dining out, like covering the bill during outings with friends,” shares Laura Faustman, a consultant in Oakland, California. “I’m not a big spender, so I always look for opportunities to earn double or triple points on my purchases. Picking up a $500 tab for a group dinner and settling up later usually makes it worthwhile.”

Though group dining—or any group activities—are largely off-limits right now, Wilson notes that there are now countless new offers and programs emerging in the wake of COVID-19, with fresh ones appearing daily. (Pro tip: Check those promotional emails from your card issuer!) She emphasizes that each card has a benefits guide detailing all perks, both new and old, which you can typically find online. Most offers require nothing more than using the card to access the benefits, but it’s wise to read the fine print. For instance, American Express doesn’t classify specialty food stores as grocery stores, meaning your local fishmonger or produce market likely doesn’t count. Even big-box retailers like Target with grocery sections may not qualify.

However, Chris Hutchins, a points optimization expert and head of autonomous financial planning at Wealthfront, points out that “there are only so many categories you can add, so when everyone starts adding the same ones, it reduces their value—especially for those with multiple cards.” Previously, consumers would often carry several cards to maximize perks—one for flights, another for everyday expenses, and yet another for hotel bookings—but that strategy might not work as well now, given the overlap in COVID-era benefits. “I somehow ended up with four grocery cards, when just a few months ago, I only had one,” Hutchins adds.

Moreover, the appeal of acquiring a new card, which usually comes with a bonus of up to 50,000 miles or more, has diminished compared to a few months ago. “I can’t use the miles I’m about to earn,” Hutchins explains. “Even if I receive a signup bonus, booking trips isn’t feasible right now.” In response, some airline card issuers are allowing credit card purchases to contribute toward status points, whereas previously, you’d typically need to travel to earn those. This is beneficial for those aiming to reach new status levels, but many U.S. airlines and hotel chains have already extended existing statuses through 2021.

If you signed up for a new card in the past four to five months, Wilson from The Points Guy mentions that you’ll likely have additional time to meet spending requirements for valuable signup bonuses. “Usually, if you get an American Express Platinum, you’d have three months to spend $5,000 for a 50,000-point welcome offer. Many credit card issuers have extended this period to six months, recognizing that people may struggle to spend that much within three months,” she notes.

You don’t need to hold onto a drawer full of credit cards to maximize the benefits of the ones you already have. If a hefty annual fee feels overwhelming right now, experts recommend downgrading to a lower-fee version of the same card. “This way, you keep the card, your credit history, and the same card number. It’s not a new application, and they’ll prorate the refund of the higher fee to the lower one. Plus, you can always upgrade again later,” advises Grossman.

For example, you can downgrade a Platinum Amex to a Gold or Green card without losing your Membership Rewards points. Similarly, the premium Citi Prestige can be reduced to the Premier or Rewards+ cards while keeping your ThankYou Points. However, Hutchins warns that some issuers might only allow you to downgrade to a card outside the same rewards program, which could mean losing your points or certain redemption options. “For instance, you might not be able to transfer points to partner airlines anymore,” he notes.

Another reliable strategy is to simply pick up the phone. “Contact the card issuer and express your dissatisfaction,” Wilson suggests. “Instead of saying, ‘I’m canceling my card,’ say, ‘I’m considering it because the costs are too high, and I’m not getting the value I expected.’” Companies are addressing these inquiries on a case-by-case basis, and some customers are receiving annual fee credits, bonus points, or retention incentives.

Much like the pandemic itself, it’s uncertain how long these offers and changes will remain in place. Most new promotions are temporary, set to last through June or July, and their continuation will hinge on the broader travel industry’s recovery. Wilson mentions that it may be challenging for credit card companies to revert back to previous policies, such as eliminating bonus points for grocery shopping and food delivery, especially if customers are content earning points this way. However, once travel resumes—whenever that may be—cardholders could see their points and perks revert to pre-pandemic conditions.

Dave Grossman is looking to reschedule his South Asian honeymoon for later this year, planning to use a combination of credit card points and frequent flyer miles. So far, he’s only managed to secure one hotel booking. “I’m still working hard to accumulate points as quickly as possible. [COVID-19] hasn’t altered my approach at all—except for where bonus points are offered on groceries,” he shares. “I’m fully taking advantage of that.”

Kristen Hawley writes about restaurant operations, technology, and the future of the industry from San Francisco. She is the founder of Expedite, a restaurant technology newsletter that has been around, in various forms, for the past seven years.