The big idea: A savings account for credit card points

Credit card points are a currency of their own. Why can’t you get a yield on them?

Jun 24, 2025

Like many millennials, my introduction to the credit card game was the Chase Sapphire Preferred. As a (then) infrequent traveler, being offered a signup bonus felt like entry into the elite.

Unfortunately, I never took the big blowout trip with them. Choice paralysis set in, I held the points for years, and eventually spent them on low-value flights to DC and San Diego. And of course, nothing has changed; I still hoard my points waiting for a great redemption that never comes.

Recently, my wife asked me about it — “why don’t you ever spend your points, do you get interest on them?1 The answer is no, but I absolutely love the idea. Can we make it real?

A brief history of credit card ecosystems

In the old days, airline points were the domain of the business traveler. It was a side perk of doing something like consulting; after a year of flying to Dayton every Monday through Thursday, your airline points might get you a first class ticket to somewhere fun in Europe. Same deal with hotel points; you might parlay your roadside Hyatt House into a trip to a luxury resort with your otherwise-neglected family.

That all changed in 2011, when the Chase Sapphire Preferred sent a shockwave through the world of semi-affluent millennials. With a 50,000 point signup bonus and big spending multipliers, you could fund once-in-a-lifetime trips purely through a financially unsound amount of eating out. For a brief, shining moment, friends would fight to be the one to put their card down — there’s no points arbitrage in Venmoing for your share of brunch.

But why was Chase so generous? In the low-interest rate environment of the 2010’s, the traditional lending business of banks lost much of its luster; it’s not very appealing to take deposits and lend it back out at 2.8%. And with low interest rates, banks weren’t able to use high savings account rates to attract new customers.

Credit cards offered an elegant solution. These cards had high annual fees that covered the cost of supporting a new customer, while filtering for those with enough disposable income to pay it. These high-value clients, whose spending and consumption drove credit card interchange fees for the banks, were easily worth the cost of the signup bonus.

With the success of the Sapphire Reserve, other banks joined the gold rush. Amex added large signup bonuses to the Gold and Platinum cards, Capital One Venture found their niche, and the popularity of airline and hotel co-branded cards exploded. The arms race peaked during COVID, when another rush of low-interest-rate spending revived massive sign-on bonuses.

At the same time, the core value of points for redemption partners began to erode. Airlines got less excited about offering their most premium seats to credit card power-users who fundamentally had no relationship with them. Sites like The Points Guy became billion dollar businesses by teaching others how to hack the system, further breaking down the loyalty assumptions that came before.

Between points’ fall in value and money having… any cost again, the party is officially over. The value of points has plummeted 20% since 2018 in a bout of very niche inflation. Worse, credit cards are restricting their signup bonuses to stop churners — people who strategically open up credit cards to maximize their points — from doing their thing.

Which brings us to today: a world with a lot of people holding on to a lot of rapidly devaluing points. Why would anyone pay interest on them?

One idea: A peer to peer lending network

Yield on any instrument — bank deposits, bonds, loans — comes from the value someone else gets from using the borrowed capital. If you’re going to get yield on unused points, someone needs to have a better use for them upfront. What about someone that’s a few points short of their vacation?

Imagine Jeff, a 32 year old engineer, tries to book the Park Hyatt New York for 3 days at 40,000 points per night. He only has 100,000 of the required 120,000 points, but he plans to get 40,000 points back through his Doordash habit over the next 2 months. He needs to book now, but buying the points costs about $440.

Instead, Jeff goes to LendAPoint, and takes out a high-interest loan to cover the gap. His lender, Greg, spends 120,000 points to book the rooms on his behalf.

Why can’t Greg just give him the 20,000 points? Unfortunately, point redemption programs are famously restrictive of direct points transfers. By purchasing the entire hotel stay, LendAPoint allows Jeff to bypass the Hyatt terms and conditions.

But this wouldn’t happen for free — Greg is going to need interest on the points he lent. Let’s say they agree that Jeff will eventually book Greg a room worth 135,000 points, 15,000 more than he borrowed. That’s a 75% return in two months, or a 450% APR.

Granted, creating a loan shark market for Hyatt points may not be the best way to get Greg his yield. But the deeper issue is that this system requires a coincidence of wants; the future point redemption has to perfectly match the proposed interest rate. With two parties and fluctuating prices, this would be extremely difficult to coordinate.

We have to go to the source: the point issuer.

Big banks might have a reason to play ball

Different types of businesses want you to interact with their loyalty programs in different ways.

Hotels are broadly incentivized to get you to spend your points. Customers that get a free room might spend money at a restaurant or spa, generating additional revenue outside of the room. Airlines are the opposite. They tend to sell miles directly to banks, 15-30% of which expire, representing pure profit for the airline. These have become major economic drivers for the airline; United’s MileagePlus program has been valued at $22 billion, over 90% of United’s current market cap.

Banks fall somewhere in between. The primary value they get from offering points is additional spending, providing profit to the bank through interchange fees. But there’s a second economic asset in the float; they owe you $3,000 worth of points, but can use that money elsewhere before you redeem. This is a flexibility that’s been under-utilized for years, and makes them the perfect partners in offering yield on points.

The pitch: launch the Chase Points Savings Accounts (CPSA), the first yield-bearing account for Ultimate Rewards Points (and only available to Sapphire Reserve holders, obviously). The CPSA acts like a normal savings account, giving a few percentage points of interest for points held inside it.

It’s not as dumb as it sounds.2 10,000 points go on the books as a $100 liability; until that’s redeemed, the bank can put that money in a treasury bond offering 4.1% annually. For Chase’s $13.2 billion in point liabilities, the total return for delaying all redemption for a year would be $542 million.

But that’s not all: points devalue at about 3.5% per year, another $462 million in implicit value. That’s over $1b in potential economic value to tap into each year by getting customers to delay redemption — plenty of margin to offer a 2% interest rate on points.

There are ancillary benefits, too. Anxious point hoarders will be even more reluctant to spend their points and miss out on the high interest payments. The exclusivity of the savings account could also attract new customers to the Chase Sapphire Reserve, providing a new competitive edge against Amex and Capital One. And it gives control over redemption to Chase — special interest rate offers can be used strategically to control point outflows at critical moments.

A revolution for the points economy

The impact on the broader points ecosystem would be immediate and massive.

At first, it would create a massive movement from other cards to the Chase Ultimate Rewards System. Seeing the rush of new customers, competitors would rapidly launch their own points saving accounts to compete. They could start competing with each other over yield, driving up interest rates for holders of credit card points.

On the redemption side, the main driver of point inflation is the proliferation of massive signup bonuses adding significantly to what I’ll call M5: the circulating supply of points. But inflation is also driven by velocity of money — how fast money is spent and circulated.

The addition of interest would act as a major shock to monetary velocity, reducing the rate of spending and the movement of points throughout the economy. With fewer points being spent, hotels and airlines will dynamically begin to increase point redemption values. Seeing prices drop, people will be even more reluctant to use them — if staying at a swanky Indonesian resort will cost 10,000 points less next year, I might decide to keep my points and wait while collecting my 2%.

This is a classic deflationary spiral, leading to a protracted point recession. This would have serious impacts on the real economy: travel and tourism make up 3% of GDP. To avoid contagion, there would need to be economic intervention. There’s only one lender who can increase liquidity at scale: the Fed.

By opening up repo swaps and temporarily trading dollars for Chase Ultimate Rewards Points, the Fed can drive a massive — but temporary — increase in the supply of points. After breaking the deflationary spiral and redeeming some points for a FOMC meeting in Macao, the Federal Reserve Board can rest assured that they are now a key regulator for the point economy.

Of course, the Fed isn’t the only regulatory agency that’ll be interested in the point economy. If a Chase Points Savings Account:

Requires an investment of money (you had to pay a $795 annual fee to qualify) ✅
In common enterprise (they’re pooled with others’ points) ✅
That pays out a profit (you’re getting 2% back) ✅
From the effort of others (the managers of the yield platform) ✅

...does that make Ultimate Reward Points a security?3 And if it is a security, does that make churning securities fraud?

In fact, it might make every part of the credit card points process securities fraud. It’s securities fraud to buy cooked food at Whole Foods to turn lunch into a 10x points bonus. It’s securities fraud if you book a mistake fare on Delta.4 If you talk your friend into using your referral code, pocket the referral bonus, and buy them dinner as a kickback, you better believe that’s securities fraud.

Official idea rating

5/5 stars. What can I say, I’m a point hoarder and I want to get some interest.

The more I wrote about this idea the more plausible it seemed. The existing paradigm of credit card points is obsolete in a post zero-interest rate world, and something has to give. Today that’s mostly taking the form of increased annual fees.

That’s pretty boring and unimaginative; is it so crazy to think that someone will develop a better model? If you’re a product manager for Chase, hit me up — I’ll take payment in the form of a special introductory interest rate for my ultimate rewards account.

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