Inflation's Effect on Points and Miles

Citylights18 · ‎01-01-2021

Found an article on TPG which claims that its a bad idea to hoard points and miles because of inflation. States that if the annual inflation rate is 2.3% (which anyone should know is an average of all goods and services) your points will be worth 2.3% less a year.

https://thepointsguy.com/guide/points-and-miles-bad-investment/?utm_source=TPG%20Daily%20Newsletter&...

You can't take the overall inflation rate and apply it in that manner. The average price of flights has dropped 52% since 1995. With COVID the hotel industry is going to be hurting for a great while as business conferences may never return at the same level.

https://www.bts.gov/content/annual-us-domestic-average-itinerary-fare-current-and-constant-dollars

The threat is more collecting more points than what you'll ever end up spending if you're constantly chasing SUBs. This is where taking extra time to garden to reach 5/24 or staying with the cards you have at the moment to complete status objectives is probably worth it than churning. There is always the chance something new will come around that is bettter than the current products out there and is worth waiting for.

Revelate · ‎01-03-2021

Same issue with any flatlined asset. Funny enough by the same token debts get cheaper every year... if I could get a 2.25% mortgage or thereabouts it'd be damned close to free money over time haha.

Yeah hoarding points doesn't make that much sense; on that note I may just take in cash a bunch of UR because even though it's suboptimal I just don't see using them in the next several years and the extra cash matters to me in the short run more than that. Maybe not financially smart but they're going to waste now and have for a while.

Revelate · ‎01-03-2021

I really need to pay atttention more anyway, why don't I ever look at the rewards site more often let alone read DoC or similar.

I can get 50% bonus points off for statement credit, same as the travel portal, on restaurants / groceries / similar? Forget trying to get 2 cpp or whatever anymore during COVID or during my new impending lifestyle where travel for work is now gone.

100K UR turned into $1500 statement credit, thank you Chase.

Citylights18 · ‎01-03-2021

@Revelate wrote:
I really need to pay atttention more anyway, why don't I ever look at the rewards site more often let alone read DoC or similar.

I can get 50% bonus points off for statement credit, same as the travel portal, on restaurants / groceries / similar? Forget trying to get 2 cpp or whatever anymore during COVID or during my new impending lifestyle where travel for work is now gone.

100K UR turned into $1500 statement credit, thank you Chase.

$1500 isn't bad when you consider the present to future value of that money. If you could use it right now in particular.

Which gets me on to another topic, the advanatage of using financing in the present to hit a financial objective rather than years of saving. I'll save the explaination for another thread.

Revelate · ‎01-04-2021

@Citylights18 wrote:
@Revelate wrote:
I really need to pay atttention more anyway, why don't I ever look at the rewards site more often let alone read DoC or similar.

I can get 50% bonus points off for statement credit, same as the travel portal, on restaurants / groceries / similar? Forget trying to get 2 cpp or whatever anymore during COVID or during my new impending lifestyle where travel for work is now gone.

100K UR turned into $1500 statement credit, thank you Chase.
$1500 isn't bad when you consider the present to future value of that money. If you could use it right now in particular.

Which gets me on to another topic, the advanatage of using financing in the present to hit a financial objective rather than years of saving. I'll save the explaination for another thread.

If an attractive APR sure. Financing at 14% or worse which would be my average credit card rate roughly, not so much imo for all that the last 2 years I should've run up my balances huge and not worried about it and cashed out a bunch of gains, well, today, and paid it all off, but I get a little leery playing with debt financing as if it does go badly, whoops.

Then again 95% LTV on a mortgage aka 5% down with rates these low? Gimme, now. Saving 20% for a better rate, no thanks.

iced · ‎01-04-2021

@Revelate wrote:
@Citylights18 wrote:
@Revelate wrote:
I really need to pay atttention more anyway, why don't I ever look at the rewards site more often let alone read DoC or similar.

I can get 50% bonus points off for statement credit, same as the travel portal, on restaurants / groceries / similar? Forget trying to get 2 cpp or whatever anymore during COVID or during my new impending lifestyle where travel for work is now gone.

100K UR turned into $1500 statement credit, thank you Chase.
$1500 isn't bad when you consider the present to future value of that money. If you could use it right now in particular.

Which gets me on to another topic, the advanatage of using financing in the present to hit a financial objective rather than years of saving. I'll save the explaination for another thread.

If an attractive APR sure. Financing at 14% or worse which would be my average credit card rate roughly, not so much imo for all that the last 2 years I should've run up my balances huge and not worried about it and cashed out a bunch of gains, well, today, and paid it all off, but I get a little leery playing with debt financing as if it does go badly, whoops.

Then again 95% LTV on a mortgage aka 5% down with rates these low? Gimme, now. Saving 20% for a better rate, no thanks.

There's times where more down and accelerated payment on historically low interest still makes a lot of sense. We did an initial 25% down because: 1. the bank required a minimum 20% down, and 2. we wanted to reduce the DTI hit so that we could carry two mortgages simultaneously. We then took our LTV from 75% to 50% in the last 5 months, despite the low rates, because it was tax advantaged for us to do so. Specifically, we brought our mortgage amount under $750,000 so that we can claim all of it against the mortgage deduction allowances. Beyond that though, yeah everything extra's going to Fidelity instead. Even parking much beyond $30k in savings anywhere makes no sense now that they're all paying under 1%.

Regarding general inflation of points, my guess is most of the inflation is in lower amounts of miles/points, and thus that's where most of it will be used and also where most of the devaluation will happen. That is, with all of the saving up and SUB accumulation you're still generally seeing a large pool of people with <300-500k points in a particular ecosystem and a small pool of people with >500k points. As a wave of people want to burn their 50-100k miles on economy flights or hotels, those will be most at risk of a devaluation, but the pool of people who spend 300k miles on a business ticket or 1 million points on a hotel in Bora Bora is still about the same pool of people it was before the shutdown, so I don't expect those valuations to change as much. Those who saved up enough during the shutdown to fall into the second bucket can still find value, but they may have to go with quality over quantity in redemptions to find it.