In finance, there is a behavioral tool known as the Investment Policy Statement. A good advisor will create one with you, and keep you to it. The purpose is to keep your emotions from ruining your plan, and to help keep you on track.
Ironically, many people in the travel game may have such a strategy in place, some indeed may be advisors who help their clients create them… but the concept doesn’t seem to straddle worlds. In other words, we see a lot of shock and panic in the travel game, much like those chicken little investors who jump at every market move.
A travel policy statement might include the following:
- Amount of points per person in household to maintain per program.
- When to transfer out of bank programs (think of this as periodic sweeping of balances)
- How far away to have flights/hotels booked.
- When to pay cash (or cash like points) vs using points, IE your valuation
- How many cards to apply for per quarter/year
- A minimum level of credit score to have before embarking on Apps
Personally I don’t have a formal strategy, but the reminder from Chase this week is that I’m holding too many Ultimate Rewards for no good reason. I don’t think it is smart to let ‘the market’ remind us when we should be adjusting our allocations, because while we might get lucky now and then and have just a friendly nudge, it is equally possible that we could allow balances to grow out of allocation, and be reminded of our risk when the accounts are closed, and balances clawed away.
If the formal idea is too much hassle for now, at the very least look at your risk profile. The biggest threat to your points balances will come from direct connections to excessive earnings. In other words, if you are earning 20K ultimate rewards per month, shifting them to Southwest, United or Hyatt will be more likely to protect them from a miffed Chase. Of course, moving points from a transferable program creates its own risks (exposure to devaluation) but nothing in life is without risk.
The lesser of two evils
For people with average earnings, I’d say the benefits of keeping points transferable outweigh the risk of closure, because risk seems correlated to habits… but if you are earning at accelerated rates, you need to keep a tight rein on balances, and siphon off points to programs you have a future use for.