In this week's credit card tip of the week on Forbes.com, I discuss the fact that Your Rewards Points Are Worthless. At least technically. If you examine the fine print of most credit card rewards agreements, you'll find that points have absolutely no cash value.
Because points have no cash value, credit card companies can make points worth whatever they want. Today, it may take 5,000 points to buy a $50 Home Depot card; tomorrow, your credit card company could charge you 6,000 points or even 10,000 points for the same reward.
Since rewards have no real value and what little value they have can change at the drop of a hat, I advise readers to ditch credit card point reward programs and switch to cashback credit cards.
The logic here is pretty simple: once you earn cash back, a credit card company can't reduce the value of the money you earned. With points, they can do this at any time, for any reason.
The credit card rewards points situation is made even worse by new regulations that may limit the amount of money credit card companies make when you swipe your card. This is not only a huge revenue source for credit card companies, but also, the source of revenue that credit card companies use to fund generous rewards programs.
If new Federal regulations cut into the profits credit card companies make when we use our credit cards, there's a good chance all rewards programs may become less generous. However, points based programs are the easiest to cut, so don't be surprised if you wake up one day to find out that your points are worth a fraction of what they were the day before.
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