Hoarding Credit Card Rewards Carries Risks

Unlike other savings, credit card rewards can lose value over time

Shaun Plum
MoneyTips Contributor

Borrowing Credit Cards

Hoarding Credit Card Rewards Carries Risks
January 9, 2017

There is certainly some enjoyment in watching your savings grow, whether its cash in your savings account or reward points on a credit card. Be careful with the latter if possible, though, because these perks almost always lose their value after a certain time. Also, inactivity on an account can result in the card issuer closing it, causing you to lose all points as a result.

The longer you hang onto reward points on your credit card, the more likely it is that they will be devalued. Whilst building points for a vacation is worthwhile, saving them for too long is risky. One man who knows this well is Seattle's Ahmed Bhuiyan. He lost $3,730 worth of points when his account was shut down in 2016 due to inactivity. At the time, Bhuiyan was working in Singapore and had stopped using the account to avoid charges for foreign transactions. Despite contacting the firm, he soon discovered that the points he had saved for his honeymoon could not be reinstated.

There are many things that affect points. Both Delta and American Airlines raised the award prices for some flights, effectively devaluing their airline miles. Inflation can also affect the cash back values of your points, so they may not be worth as much after a while as when you first earned them. Also, unlike other savings accounts, reward balances will not earn interest.

In general, it's best to spend your rewards regularly. Watch out for any traveling bargains that can be snapped up. Redeem your cash back quickly, or invest it in an IRA account to earn interest for your future. Above all, review your rewards balances often to ensure that you don't lose any perks.

If you want more credit, check out MoneyTips' list of credit card offers.

Photo ©Depositphotos.com/Elnur (Elnur Amikishiyev)

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