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When to Redeem vs When to Hold: Math Behind Point Valuations Over Time
July 1, 2025
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You've worked hard to earn those points. Maybe you've hit welcome bonuses, maximized bonus categories, and diligently tracked your spending. But here's the question that keeps optimizers up at night: Should you redeem those points now or hold them for something better?
The answer isn't just about finding good redemption value—it's about understanding how your points change in value over time. Because unlike cash sitting in your bank account, credit card points can appreciate, depreciate, or even vanish completely.
What Most People Get Wrong About Point Values
Here's the trap: You see that flight to Paris costs 50,000 points or $600 cash. Simple math says your points are worth 1.2 cents each ($600 ÷ 50,000 = $0.012). Great redemption, right?
Not necessarily.
What if that same flight cost 40,000 points last year? Your "good" redemption is actually a 25% devaluation. Or what if American Express announces next month that Paris flights will cost 70,000 points? Suddenly, today's "expensive" redemption becomes a steal.
The reality: Point values fluctuate constantly based on three factors:
- Program devaluations (airlines and hotels increase redemption costs)
- Transfer ratios (when issuers change transfer partner rates)
- Award availability (fewer seats at standard rates)
According to analysis of major loyalty programs, points depreciate an average of 5-8% annually through program changes alone.
The Hidden Cost of Hoarding Points
The average Kudos user holds $624 in unused benefits and credits. But the real cost isn't just forgetting to use them—it's opportunity cost compounded by depreciation.
Let's say you're saving 200,000 American Express Membership Rewards® points for a "dream trip" three years from now:
Today's value (at 2 cents per point): $4,000
Projected value in 3 years (6% annual depreciation):
- Year 1: $4,000 × 0.94 = $3,760
- Year 2: $3,760 × 0.94 = $3,534
- Year 3: $3,534 × 0.94 = $3,322
Total loss: $678
Terms apply to American Express benefits and offers. Enrollment may be required for select American Express benefits and offers. Visit americanexpress.com to learn more. Eligibility and Benefit level varies by Card. Terms, Conditions, and Limitations Apply. Please visit americanexpress.com/benefitsguide for more details. Underwritten by Amex Assurance Company.
5 Scenarios: When to Hold Your Points
Scenario 1: Current Redemptions Are Below Aver
The rule: If you're getting less than 0.8 cents per point, you're usually better off waiting (with exceptions).
Scenario 2: Better Transfer Partners Are Coming
Credit card issuers occasionally add high-value transfer partners. Chase, Amex, Capital One, and Citi all announce new partnerships throughout the year.
Scenario 3: You're Close to a Milestone Redemption
The psychology: Getting 80% value on 100,000 points feels worse than getting 90% value on 120,000 points—even though the first is worth more ($800 vs $1,080).
Scenario 4: Elite Status Benefits Matter
If you're pursuing airline or hotel elite status, paid bookings often make more sense—even if points would "save" money.
Scenario 5: Market Prices Are Abnormally High
The principle: If cash fares are 30%+ above historical averages, they'll likely drop—making your points relatively less valuable today.
The Kudos Strategy: Automate Your Decisions
Manually calculating depreciation, monitoring devaluations, and tracking price trends? Nobody has time for that.
Kudos automatically:
- Tracks point values in real-time across your entire portfolio
- Alerts you to devaluations before they take effect
- Recommends optimal redemption timing based on your specific travel goals
- Shows you exactly which points to use first to minimize depreciation
The result: Users who follow Kudos timing recommendations save an average of $441 annually compared to redeeming randomly.
Advanced Strategy: The Points Velocity Model
Here's where sophisticated optimizers separate from casual users. Instead of asking "should I redeem?", ask "at what rate am I earning vs depleting?"
Your points velocity = (Monthly earning rate) - (Monthly depreciation) - (Monthly redemptions)
Example:
- Monthly earning: 8,000 Ultimate Rewards points
- Monthly depreciation: 6% annually = 0.5% monthly on 200,000 balance = 1,000 points
- Monthly redemptions: 0 points (you're hoarding)
Net velocity: +7,000 points/month
Optimal strategy: If you're accumulating 7,000 points monthly but depreciation costs you 1,000, you're effectively only gaining 6,000. By redeeming current balances for 1.2+ CPP value, you lock in value before depreciation erodes it.
The Decision Framework: 4 Questions to Ask
Before every redemption decision, ask:
1. Is my CPP value 20%+ above program average?
- Yes → Redeem now
- No → Continue evaluation
2. Are program changes rumored or announced?
- Yes → Redeem before changes
- No → Continue evaluation
3. Will waiting help me reach a significantly better redemption?
- Yes, within 3 months → Hold
- No, or longer timeline → Redeem now
4. Am I pursuing elite status that requires paid bookings?
- Yes → Pay cash, earn status
- No → Redeem points
The One-Year Rule
If you can't identify a specific redemption goal within the next 12 months, redeem your points for above-average value opportunities now.
Why? Because:
- 12-month depreciation averages 6-8%
- Better to lock in 1.2 CPP today than hope for 1.5 CPP in a year (which becomes 1.4 CPP after depreciation)
- Having unused points creates decision paralysis that costs you more
FAQ: Timing Point Redemptions
Do credit card points really depreciate?
Yes. According to industry tracking, major loyalty programs devalue awards by 5-8% annually on average. Some years have no changes; others see 15-20% jumps. The trend is consistently negative.
Should I always redeem points as soon as I earn them?
Not necessarily. The sweet spot is maintaining enough points for planned redemptions within the next 12 months, while redeeming excess balances at above-average values.
What if I'm saving for a specific trip years away?
Calculate the expected depreciation cost and compare it to your earning rate. If you can earn the required points within 12 months of travel, wait. If not, book now and start saving for the next trip.
How do I know if a program is about to devalue?
Watch for: annual award chart announcements, merger/acquisition news, program rebranding, and changes to earning structures. Following frequent flyer blogs and setting Google Alerts helps.
Is it ever worth holding points for more than 2 years?
Rarely. Beyond 24 months, compound depreciation typically exceeds any benefit from waiting—unless you're accumulating points toward a genuinely aspirational redemption (like international first class) and earning at a high rate.
The Bottom Line: Time Is Money, Points Are Time
The most common mistake isn't redeeming for poor value—it's waiting too long to redeem for good value.
Every month you hold points costs you approximately 0.5% in depreciation. That's $50 per year on a 100,000-point balance, or $250 over five years.
The optimal strategy:
- Maintain a 12-month rolling balance for planned travel
- Redeem excess points when you find 20%+ above-average value
- Never let points sit unused for more than 18 months without a specific redemption plan
- Let Kudos monitor values and alert you to optimal timing
Your move: Calculate your current point balance. Multiply by 0.06. That's what you'll lose this year by doing nothing. Now go book something worth remembering.
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Editorial Disclosure: Opinions expressed here are those of Kudos alone, not those of any bank, credit card issuer, hotel, airline, or other entity. This content has not been reviewed, approved or otherwise endorsed by any of the entities included within the post.
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