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Super Contributor
Posts: 6,236
Registered: ‎02-23-2011
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The risks of hoarding rewards?


If memory serves, wasn't this the Debit card that Dave Ramsey touted?  It still astounds me that anyone listens to this guy.

Super Contributor
Posts: 9,668
Registered: ‎01-28-2010
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Re: The risks of hoarding rewards?


Yeah that's pretty bad to have rewards vanish overnite like that.   Like they say, use 'em or lose 'em.  Cat Frustrated

March2010 FICO® ~ 695 TU, 653 EQ, 697 EX
Established Contributor
Posts: 637
Registered: ‎07-24-2012
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Re: The risks of hoarding rewards?

There is always a risk to hoarding rewards.  If they're not taken away outright, they can always be devalued. e.g. what if all those SPG transfer partners went from a 1:1 transfer ratio to 2:1?  Suddenly that hoard of Starpoints you have is worth half as much.


That being said, the demise of PerkStreet was thoroughly predictable.  Ever since Dodd-Frank revised the interchange fees for debit cards, it has been a matter of time before rewards debit cards became extinct.  In the current regulatory climate, the risk at PerkStreet was significantly higher than it was and is with credit-based rewards programs. Regulations can always change, but just as we did with Dodd-Frank we'd have time to see the new laws coming and plan accordingly.


Finally, not only is there always a risk to hoarding rewards points, there is also almost always a reward.  Typically, the best redemption values require you to spend larger amounts of points  e.g. SPG's 20% bonus when you transfer points in blocks of 20,000.  To get the best value for your points, you often have to hoard for a while.


Unsurprisingly, Marketwatch makes no mention of Dodd-Frank, the difference between debit and credit cards for rewards, or the value proposition of saving points for maximum redemption power.  Nope, they just go for inflammatory "Poof! Your credit card rewards went up in smoke" / "Never trust rewards programs" linkbait BS.


The main thing I can say about the inherent risk of rewards is this: never think of them as having a fixed cash value.  Just because that Membership Rewards point or SkyMile or Starpoint redeems for up to 3 cents today doesn't mean it will do so in the future.  Think of them as a foreign currency whose exchange rate can fluctuate.  There's nothing wrong with holding on to some of that foreign currency.  It just means that sometimes if you can get that Macbook Air for $1400 one place and $1500 plus 15,000 MysteryPesos somewhere else, it might be smarter to save the actual cash now than rely on those 15,000 MPs being worth $100 or more later.  That all depends on how confident you are in the stability of MysteryPesos.

Starting: EQ 622 (myFICO 7/7/12), EX 696 (TU FAKO 8/14/12), TU 621 (CK TransRisk 7/24/12), Total CL $1k on 2 TLs
Current: EQ 709 (CCT 2/4/15), EX 704 (CCT 2/4/15) , TU 702 (CCT 2/4/15), Total CL $110.3k on 14 TLs Goal: 740+ x3
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My Loans: Prosper $25k/36mo, Prosper $17k/36mo
My Business: Chase Ink VS $5k, Amex BRG NPSL (> 10k),
Frequent Contributor
Posts: 355
Registered: ‎04-21-2012
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Re: The risks of hoarding rewards?

Yep and you have to watch the fine print too.  For example, I had a Visa card with cash rewards that could be spent on a car purchase.  The fine print says that Visa can refuse to honour the rewards if you are 60 days late.  And so I was and so "Poof" went the $500+ that I had built up that I would have spent on a down payment.  Vapour!  I called it legalized theft!  Buyer beware and always read the fine print on your reward redemptions.

Starting Score: 732 October 2007; Current Score: EQ 835; TU 806, May 2017;
Oldest Reporting Account: 15.3 years; EQ AAoA: 7.2 years; typical credit utilization 1.2% typical single card utilization 8.3%
Posts: 82
Registered: ‎05-04-2008
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Re: The risks of hoarding rewards?

This explains why a lot of my cash rewards cads have switched to points. So far its one to one, but I wouldnt be surprised now see sudden changes in ratios. Thanks for the heads up. Cashing out all rewards when they are available seems smart.

5/08 EQ 696.....9/13 EQ 796.....9/17 EX 824, EQ 843
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