Reported Flexperks changes and two kinds of breakage

As I first saw reported at Doctor of Credit, people are saying that Flexpoints earned with the US Bank Flexperks Travel Rewards credit cards will be redeemable for 1.5 cents each beginning on January 1, 2018. They're currently worth as much as 2 cents each for paid airline tickets at the top of their redemption bands, and as little as 1.33 cents at the bottom of a redemption band.

I don't have any insight into whether these reports are true, not having seen any communications from US Bank about any upcoming changes. However, since I seem to have a reputation as the biggest booster of Flexpoints in the travel hacking community, I certainly have been thinking about it.

People are anxious to make definitive declarations about whether the change would be an improvement or a devaluation. That judgment comes down to the intersection of two kinds of breakage.

Breakage as unredeemed value

This is the form of breakage that most immediately leaps to mind when you hear about a change like this. If you are able to consistently redeem your Flexpoints for flights at or close to the top of US Bank's redemption bands, then the value you would receive on redemptions after January first will drop by 25%. The further your actual redemptions are from that ideal redemption, the less the effect the change in redemption value will affect you: you can easily imagine someone who typically books $300 flights or $450 flights with Flexpoints and won't suffer at all from reducing their "maximum" value from 2 cents to 1.5 cents: they'll redeem the same number of points for their typical flight.

More than that, the current system of redemption bands creates an anxiety over unredeemed value. The difference between the $600 maximum value of 30,000 Flexpoints and the actual value you receive creates a disincentive to redeem points at all. Earning points and not redeeming them because of anxiety over getting a "good" redemption value means you might find yourself redeeming other potentially more valuable miles, or even cash, in order to "save" your Flexpoints for a more valuable redemption. You can be disciplined and always "redeem points and miles first," as I do, but that doesn't eliminate the fear of missing out that can be genuinely frustrating.

In other words, a fixed value for redemptions up and down the price scale has the advantage of consistency, even if it removes the ability to swing for the redemption fences.

Breakage as unredeemed points

A different kind of breakage is stranded or unredeemed points. If you're a Flexperks aficionado you may be familiar with ending a statement cycle with 19,000, 39,000, or 99,000 Flexpoints. In the first case your points are worth $190 in cash, in the second case they're worth up to $400 in flights plus $190 in cash, and in the last case they're worth up to $1,600 in flights and $190 in cash. In other words, "odd lot" Flexpoint balances are worth 1 cent each, 1.51 cents each, or 1.81 cents each, not the 2 cents each that you are hoping for.

The more difficult it is to redeem points (e.g. requiring a minimum of 20,000 points), the more points are likely to be stranded in your account at any one time. Stranded and unredeemable points balances are worth nothing (or one cent each, which is close enough). They're not even worth the 1.5 cents each posited under the new redemption regime!

Conclusion

The important thing to understand is not that the changes being reported are "good" or "bad."

In many ways they tug in different directions: the breakage of unredeemed value will be eliminated, but the amount of value locked in will be lower than the value many, if not most, Flexperks cardholders are currently receiving.

On the other hand, if the changes also inaugurate an elimination of minimum redemption amounts, the number of Flexpoints stranded will be reduced by creating more flexibility in award construction, with one-way flights and flights in different classes of service such that you're able to spend down as much of your Flexpoints balance as possible with each redemption. Fewer stranded Flexpoints is an unalloyed good, just as lower maximum redemption value is, for most customers in most circumstances, a devaluation.

That leaves one question which only the individual cardholder can answer: will you get more value from your formerly-stranded, newly-redeemable rump Flexpoint balances, or less value from knocking down the maximum value of points you planned to redeem for flights at the top of the current redemption bands?

Neither I nor any other blogger, thought leader, or guru can answer that question for you.