If President Donald Trump’s proposal to temporarily cap credit card interest rates at 10% becomes law, it could change many policies for borrowers. That includes how issuers determine the value of credit card points.
If you’ve accumulated a significant amount of credit card points, you should probably spend them now, but you shouldn’t because your interest rate cap could be as high as 10%, says Nick Ewen, senior editorial director at The Points Guy.
“This in and of itself is not a reason to spend points,” Ewen said. Points should have been consumed before the announcement.
Credit card points — the perks you earn by using your card that can be redeemed for travel, cash back, merchandise and other perks — are primarily funded by fees merchants pay on each transaction, as well as interest and sometimes fees paid by cardholders, Ewen said.
In other words, if the interest rate cap is set at 10%, issuers’ profits may decrease. To compensate for that revenue loss, rewards programs may reduce the points you earn on your cards, increase redemption costs or offer fewer benefits, Ewen said.
But with so much uncertainty surrounding President Trump’s proposal, he said it would be a “fool’s errand” to set a date when points would start losing value if interest rate caps were implemented.
Why you should use your credit card points now
Ewen says there are two main reasons why you need to use your points consistently.
Credit issuers can change their policies Points tend to lose value over time
Hotels, airlines and credit card rewards programs are free to change their redemption policies and don’t necessarily have to provide advance notice of upcoming changes, Ewen says.
“You never know what the future will bring,” Ewen says. Hoarding points “could come back to haunt you if something major changes in the program that holds them.”
The changes rarely increase the value redeemable for points, Ewen said. If your credit card comes with perks, whether it’s a favorable redemption rate or the option to transfer your points to an airline or hotel loyalty program, Ewen says it might be wise to take advantage of them now if you plan on using them.
Plus, unlike money you put in a high-yield savings or investment account, points don’t earn interest. This means that real value is lost over time as the price increases. Even if ticket prices go up, $100 worth of airline points will still be worth $100 next year, Ewen says.
“The idea of using points keeps money in your pocket and allows you to use it elsewhere,” says Ewen. “Sure, you can earn more through spending and other activities, but your balance won’t grow by just sitting around.”
How many points are too many?
Ewen says the number of points you should keep on hand varies from person to person and largely depends on how often you redeem points. He added that it’s helpful to save up points for emergencies such as last-minute flights.
If you travel domestically or internationally multiple times a year, it may be better to have more points. Infrequent travelers should start thinking about using their points once they reach the mid-to-high five digits, he says.
Ewen says she often sees people saving up points for big trips like honeymoons. Keep in mind that points are often redeemed several months in advance, so you may be able to rebook and recoup the difference in points, especially if the price of your flight drops. But Ewen says you should check with your provider first.
If you have points to use for a flight right now, use those points for that flight, he says. “That would be the best option.”
Want to use AI to advance your work? Sign up for CNBC’s new online course, Beyond the Basics: How to Use AI to Supercharge Your Work. Learn advanced AI skills like building custom GPTs and using AI agents to increase your productivity today.
