Diversify Credit Card Points to Maximize Value and Avoid Devaluation

Treating credit card rewards as a concentrated asset can expose consumers to significant value loss, a risk that parallels the danger of putting an entire retirement portfolio into a single stock. As airline loyalty programs grow into multi-billion dollar enterprises, experts suggest that diversification across different types of points and currencies is essential to protecting purchasing power.

Nick Ewen, the editor-in-chief of The Points Guy—a publication focused on optimizing the consumption of credit card points and miles—notes that many consumers make the mistake of collecting all their rewards in a single location without understanding their true value. Ewen, who has spent two decades in the points and miles industry, observed this issue when a friend redeemed American Express Membership Rewards points for an appliance on Amazon, effectively destroying the points’ potential value.

While those points could have been transferred to an airline partner to cover a round-trip flight, the Amazon redemption resulted in a rate where each point was worth less than a cent. I was like, you can’t do that, Ewen told Fortune.

The Risk of Loyalty Program Volatility

The logic for diversifying rewards is similar to an investment strategy. Ewen argues that being all in on one stock leaves an investor vulnerable if that stock fails. In the context of travel, if a consumer spends exclusively with one carrier, such as Delta SkyMiles, they are at the mercy of that company’s decisions regarding award charts, redemption prices, or route availability.

By maintaining balances across multiple programs—such as Delta, United, and Chase—consumers create a hedge against sudden changes in any single ecosystem. This protection is increasingly important given the massive economic scale of airline loyalty programs. These programs are now valued in the tens of billions of dollars, sometimes exceeding the valuation of the airlines themselves.

During the pandemic, United, Delta, and American Airlines collectively raised $26 billion in debt backed by their frequent flyer programs. The disparity between airline equity and program value is stark:

• United’s MileagePlus was appraised at $22 billion, more than double the airline’s equity value at the time.
• American’s AAdvantage was valued at up to $30 billion, while the airline itself was valued at less than $7 billion.

When programs of this magnitude adjust their pricing, the impact can affect millions of point balances simultaneously. This volatility makes diversification a necessary defensive move, though Ewen warns that there is a limit to how much one should spread their resources.

For those with lower monthly spending, over-diversification can make it difficult to accumulate enough points for meaningful redemptions. Ewen suggests that a person spending $3,000 a month across four programs may struggle to book travel, whereas concentrating that same spend on two well-chosen programs offers a better chance at significant rewards.

Prioritizing Flexible Currencies

To balance flexibility and accumulation, Ewen recommends that travelers who justify a travel card should prioritize flexible points currencies over co-branded airline or hotel cards. Flexible currencies, such as Chase Ultimate Rewards, Amex Membership Rewards, or Capital One miles, can be transferred to various partners, preventing users from being locked into a single program’s pricing models.

For example, while many United flyers use co-branded United credit cards, Ewen points out that the Chase Sapphire Preferred may offer better value. The card often earns at higher rates on categories like dining, general travel, and online groceries. Because Chase points transfer to United at a one-to-one ratio, consumers can often accumulate more United miles through the Sapphire Preferred than through a dedicated United card, while retaining the ability to send those points to other partners like Hyatt or Southwest if United’s redemption rates are unfavorable.

We find, weirdly, oftentimes much better options than having a co-branded credit card, Ewen said.

Navigating a Crowded Market

The complexity of the credit card landscape is also a concern for issuers. Richard Kerr, the GM of Travel at Bilt, observes that the co-branded market has become so saturated that consumers often face decision fatigue. With numerous options for every airline and hotel, the sheer volume of choices can be overwhelming.

It’s now an incredibly competitive world, Kerr said. Not only a million options between different airlines and hotels, but each airline and hotel has four or five different options for you to take a look at.

For consumers looking to enter the rewards space, Ewen suggests a gradual approach to build “muscle memory.” He recommends starting with one card and becoming comfortable with its benefits for six months to a year before adding a second card with different bonus categories.

For those who prefer to avoid the complexities of tracking bonus categories and quarterly rewards, Kerr suggests that a simple, no-annual-fee card with a flat 2% cash back on all purchases is a reliable alternative. Never a wrong way to go, Kerr said.