Olivia and Max each have 80,000 points in a loyalty programme. Same balance, same programme.
Olivia is saving them for the perfect trip. She has been saving for two years. She refreshes the booking site every few months to see how close she is to her dream redemption.
Max booked a flight last month with his 80,000 points. Not his dream redemption. A real flight to a real place. He used the points and moved on.
Two years ago, the trip Olivia is saving for cost 60,000 points. Last year it cost 80,000. Today it costs 95,000. Her balance has not moved. The cost has. She is now further from her redemption than when she started.
Max captured the value when it was there. Olivia is still chasing it.
Our minds value something more once we own it, even when its real value has dropped over time. Olivia is not greedy. Her brain is simply protecting the points she earned, the way all our brains do when something we collected starts to feel like a personal possession. This behaviour has a name: Endowment Effect.
A loyalty point is typically worth around 1 cent. Two years ago it was worth closer to 1.4 cents. Across many programmes, that is a 30 percent drop in real value. The brain does not see this. The number of points stayed the same, so the value feels the same. The fix is to treat points like cash with an expiry date. Use them on a real trip you would have paid for anyway, even if it is not the dream redemption.
TL;DR
- Situation: You have a loyalty balance you have been saving for the perfect redemption. The redemption keeps getting more expensive while your balance does not move.
- What your mind does: It treats points you collected as a personal possession and inflates their worth, so spending them feels like a loss (this is called Endowment Effect, see below).
- Consequence: Points typically lose 20 to 40 percent of their real value across a few years while members keep saving them.
- What to do: Use the points on your next realistic trip. Treat them like cash with an expiry date, not like a souvenir.
What to do
- Use your points on the next realistic trip, even if it is not the dream redemption.
- Check your programme's expiry rules once a year. Use the points before they expire.
- Compare the cash price of a trip to what your points would buy. Pay cash when the maths favours it.
- Treat points like cash that drops in value over time, not like a collection that grows.
What not to do
- Do not save points for years waiting for the "perfect" redemption. The redemption gets more expensive while you wait.
- Do not assume 80,000 points today are worth 80,000 points next year. They almost never are.
- Do not stay in a programme out of habit when your travel patterns no longer match it.
Points you never use are not savings. They are a balance that drops in real value while you wait for a trip that keeps moving further away.
Want to understand why this happens?
The Endowment Effect is the brain's habit of valuing something more once it is yours, even when nothing about the thing has changed.
Researchers gave half of a group a coffee mug. The other half got nothing. Then they asked the owners how much they would sell the mug for, and asked the others how much they would pay to buy it. The owners demanded roughly twice as much to sell as the others were willing to pay. The mug had not changed. Ownership did.
It is not you. It is how every human brain handles things it has collected.
Loyalty points are the same mug with a digital balance. You collected them, so they feel valuable. The brain does not run a refresh on their real worth as the redemption costs climb. It holds onto the number of points and assumes the value held too.
"People demanded much more to give up a mug they had owned for minutes than they were willing to pay for the same mug." — Daniel Kahneman (paraphrased from Thinking, Fast and Slow, 2011, chapter on the Endowment Effect)
This is called Endowment Effect. Daniel Kahneman, Thinking, Fast and Slow (2011).
Get the next pattern before it gets you.
Get free weekly patterns explained in 60 seconds.
Free forever · Unsubscribe anytime
Related decisions
Paying only the minimum on your credit card
Behind this pattern: Hyperbolic Discounting (Dan Ariely, Predictably Irrational (2008)).
Saying yes to add-ons at checkout
Behind this pattern: Loss Aversion (Daniel Kahneman, Thinking, Fast and Slow (2011)).
Buying on the first price you see
Behind this pattern: Anchoring (Dan Ariely, Predictably Irrational (2008)).
Paying for a gym membership you no longer use
Behind this pattern: Sunk Cost Fallacy (Dan Ariely, Predictably Irrational (2008)).