Saving reward points and miles isn't a sound money strategy

JetBlue travel rewards credit card
Adam Jeffery | CNBC

Americans are, by most measures, horrible at saving — except when it comes to reward points, it seems. Unfortunately, that's one time where waiting for a rainy day may not be a winning strategy.

Just 15 percent of Americans have ever redeemed points to pay for part or all of a trip, according to a new survey of 1,012 adults from the American Institute of CPAs.

In all, consumers are holding on to 195.4 billion unredeemed loyalty points in hotel, airline, retail and other loyalty programs — about 70 percent of all points earned or available since the start of the year, per new data from reward platform

"There are a lot of people who don't actually use their points," said Eric Engleman, general manager of product for Switchfly.

At least some of that outstanding-points balance is from consumers who sign up for loyalty programs opportunistically, with no intent of using the program frequently enough to earn a reward, he said. For example, joining to get the free Wi-Fi offered to hotel loyalty members or getting in on a restaurant's program just for the teaser free-appetizer coupon. The average household has 29 different reward memberships but uses just 12, according to the 2015 Colloquy Loyalty Census.

It really is quite difficult to pay for your trip in full with some of these programs.
Sean Stein Smith
member of the AICPA National CPA Financial Literacy Commission

Other people employ an earn-and-hold strategy, hoarding their points for, say, a first-class airline seat or Beyoncé tickets.

"Often, customers are thinking about the biggest and best reward they can get for their points," said Jeff Berry, editor-in-chief of market research firm Colloquy.

Then there are people who would really like to use their rewards but just can't. Among airline programs, specifically, the factor most differentiating highest- and lowest-performing programs is the ease of redeeming miles, according to a J.D. Power report.

"It really is quite difficult to pay for your trip in full with some of these programs," said certified public accountant Sean Stein Smith, a member of the AICPA National CPA Financial Literacy Commission.

Earn and burn

Letting your balance linger is often a risky strategy, however.

"Miles devalue massively over time," said reward expert Ben Schlappig of the "One Mile at a Time" blog. "It always makes sense to have an 'earn and burn' philosophy."

Points can expire. Those in credit card programs may disappear if you close the card. Program changes could also mean an award is suddenly further out of reach or a particular redemption option less valuable.

"You really need to be mindful of is the company changing the terms and conditions," said Berry.

This spring, for example, American Airlines changed its award chart, upping the mileage on many premium reward seats — a one-way first-class ticket to Hawaii now costs 65,000 miles, up from 47,500. (The airline's new revenue-based mile-earning system, which will make it harder for some travelers to earn miles, kicked in Aug. 1.) Last month Chase announced that effective Sept. 1, consumers will need to redeem 125 points for a $1 credit on, up from a current 100.

To make sure you're maximizing rewards, crunch the numbers on the value of different program rewards and how much you're spending to get there, Colloquy's Berry said. (Factor in that there may be fees and taxes associated with redemption.)

Mind your cards to maximize rewards

Examine spending patterns to see if it makes sense for you to consolidate.

"A lot of consumers participate in so many programs that they aren't earning enough in any one to get rewarded," Berry said.

Pay attention to rewards program changes, said Engleman. That can help you decide whether to change your pattern — saving up to get a bigger reward or accelerating redemption to beat any devaluation.

If you're not actively participating, check to see if there are any minor rewards you can redeem for in that program or with partners instead of letting points expire, Berry said.

"Look at what balances you have in any of the programs and find opportunities to use those," he said.