US Congress is mulling credit card reforms that could devalue loyalty rewards. 2 big reasons to redeem your points now — not just sit on them

On the upside, as the Urban Institute notes, it could dramatically reduce borrowing costs for millions of Americans (2).

But as CNBC Make It notes, it could also impact the value of points millions of Americans collect on their reward cards (3).

As NerdWallet reports, if the 10% interest rate cap becomes law, reward-card issuers may devalue their points to make up for lost interest revenue (4).

Trump’s proposal is an example of the kind of thing that can change the game when it comes to rewards, Nick Ewen, senior editorial director at The Points Guy, told CNBC Make It.

“You don’t know what the future is going to hold,” Nick Ewen, said, noting that stockpiling points “can really come back to bite you if something changes significantly in the program that you are holding them in.”

Here are the 2 big reasons Ewen cautions against hoarding large stashes of unused credit card points.

2 reasons to spend your points

1. Potential for companies to change their reward policies

Regardless of what happens with Trump’s proposal, the fact is that credit card and other reward programs can change their redemption policies at any time, devaluing the value of your rewards.

That means your points are worth less over time, especially when you factor in inflation.

For example, CNBC noted that last year World of Hyatt made it harder to book some of its properties on points by shifting hotel tiers.

Meanwhile, Southwest Airlines reduced how many points you get per dollar on certain fares (5).

So if it seems like you need more points to make a redemption these days, it’s not your imagination. It’s ‘pointsflation.’

In fact, inflation itself is another challenge.

2. Rewards aren’t a guaranteed store of value.

Millions of Americans treat their credit card rewards like cash savings, assuming they’ll gain in value over time or that they’ll never expire.

But rewards are a depreciating asset, losing their value over time. They’re not FDIC-insured. And, in many cases, they can expire.

So consumers who stockpile rewards may be unknowingly losing their buying power.

In contrast, if you put cash into a high-yield savings or investment account, you earn interest, and that interest compounds over time, helping to combat inflation.

Making the best use of your rewards

This doesn’t mean you should cash out all your points immediately.

Rather, it’s about keeping a ‘healthy’ points balance — and that number will be different for everyone.

Instead of hoarding points, come up with a strategy to redeem your points regularly and consistently.

Ewen told CNBC that it may make sense to hold onto more points if you travel regularly or if you’re saving for a big trip, like a honeymoon.

You might also want to save points for last-minute emergency flights (say, a family member in another city gets sick).

But if you take one vacation a year, collecting travel points probably isn’t worth it.

Yet, it can sometimes be hard to let go of those points — what some refer to as ‘redemption anxiety.’ Say, for example, you keep waiting for a better redemption deal to maximize the value of your points, so you end up never spending anything (6).