Inflation Update: What It Means for Credit Card Rewards

After the Latest Inflation Report: Are Rewards Still Worth It?

The United States continues to face a complex inflation dynamic: although rates have slowed compared to recent peaks, prices still pressure purchasing power.

In this context, understanding what current inflation means for credit card rewards becomes essential for anyone looking to maximize the value of their spending.

Recent Inflation Trends in the U.S.

After reaching very high levels in 2022–2023, U.S. inflation has shown signs of easing.

Although the Consumer Price Index (CPI) still rises in some months, rates are no longer near previous extremes.

This slowdown provides some relief, but it does not eliminate the residual effect of accumulated increases: many goods and services still cost significantly more than before the inflation surge.

How Inflation Erodes Credit Card Rewards

1. Fixed Spending Limits

One of the most subtle but significant effects is that many cards set spending limits for extra benefits.

These limits — for example, spending up to $X to earn 5% back — are often not adjusted annually.

In practice, with inflation, these caps lose “real value.” You reach the limit faster in terms of purchasing power, and additional rewards stop growing with you.

Bankrate highlights this exact issue: spending caps remain the same while purchasing power declines over the years.

2. Devaluation of Points and Miles

In points- or miles-based rewards programs, many issuers have abandoned fixed redemption tables in favor of dynamic pricing adjusted to market rates.

In other words, if an airline ticket increases in price, the number of miles required to redeem it also rises. Points therefore “lose value” in practical terms.

Additionally, because points and miles do not generate financial returns — unlike stocks, bonds, or even inflation-adjusted investments — their purchasing power erodes over time.

3. Less Flexibility in Extra Perks

During inflationary periods, consumers tend to value more liquid and flexible rewards — such as cashback or direct discounts — rather than refined or “luxury” perks (VIP lounge access, exclusive events, upgrades).

When budgets tighten, priorities shift. Card issuers notice this change: in times of inflation, consumers prefer cashback and flexibility over luxurious rewards or sophisticated perks.

Practical Impacts for Credit Card Users

Everyday Use and Essential Categories

If your card offers extra rewards in categories like groceries, gas, pharmacies, or food delivery, these returns tend to be more useful during inflation because they cover recurring expenses.

However, these bonuses often come with limits or requirements (for example, “earn 5% up to $X per quarter”). These fixed limits can penalize consumers in an inflationary environment.

Credit Costs and Interest Rates

Even if you maximize rewards, the benefit can be wiped out if you carry a balance on the card.

Credit card interest rates are typically very high, and when inflation and benchmark rates rise, revolving credit rates also tend to increase.

Therefore, it is always recommended to pay the full balance when due. Only then do rewards remain beneficial despite financial costs.

Reassessing Cards and Rewards Strategy

• Switching to a simple cashback card without hidden category limits
• Moving to programs that offer more robust bonuses on essential spending
• Choosing cards whose redemption program is less volatile (less dependent on dynamic pricing)
• Redeeming rewards more quickly instead of accumulating them for too long

Trends Observed in the U.S. Market in 2025

• A 2025 survey found that more than half (53%) of cardholders carry revolving debt (balance not fully paid).
  This reinforces the idea that many users do not fully benefit from their rewards programs, as interest charges erode gains.
• Another study revealed that credit cards with annual fees tend to generate higher satisfaction among financially healthy users.
• There is also evidence that rewards are becoming “less generous” over time, with analyses highlighting that “credit card rewards are slowly becoming way less rewarding.”

Tips to Maximize Rewards Even During Inflation

1. Spend in categories with high and recurring bonuses
2. Pay attention to spending limits (caps)
3. Maintain high liquidity and avoid revolving balances
4. Redeem rewards regularly
5. Diversify types of rewards
6. Monitor changes in the rewards program
7. Use cards strategically for larger purchases

Written by

Gabriel Gonçalves