Loyalty points look like savings but behave like a currency whose issuer sets both the exchange rate and the rules. That control is what determines how much a balance is actually worth.
The issuer sets both sides of the rate
Points are earned at a rate the programme chooses and redeemed at a rate the programme also chooses, with no external market to anchor either.
Nothing obliges an issuer to keep the redemption rate fixed, and adjustments are usually made with limited notice.
A balance is therefore a claim of uncertain value, unlike money in an account, which is a fixed claim.
Devaluation is quiet and one-directional
Rates are changed by raising the number of points required for a given reward rather than by announcing that points are worth less.
The balance on the statement is unchanged, so the loss is invisible unless the shopper remembers what the same reward cost previously.
Adjustments over the years have consistently moved in one direction, which makes holding points for a long period a losing position in most programmes.
Redemption value varies enormously by use
Within one programme, points can be worth several times more redeemed against one reward than another, with merchandise catalogues generally the poorest option.
Working out the value per point for each redemption route, by dividing the cash price by the points required, makes the comparison direct.
That figure is also the only sound basis for judging whether an earning offer is generous, since a high points rate on a low-value point is worth little.
Breakage is built into the economics
Programmes expect a share of points never to be redeemed, through expiry, account closure or simple inattention, and this expectation is factored into the cost of running the scheme.
Expiry rules, minimum redemption thresholds and account inactivity clauses all increase that share.
Points sitting unredeemed are therefore working for the issuer rather than the holder, which argues for redeeming regularly rather than accumulating.
Programme changes can arrive suddenly
Terms typically reserve the right to alter earning rates, redemption values and partner arrangements, and mergers or partnership changes can reshape a programme quickly.
The practical response is to treat points as short-term value to be used rather than as a store of wealth to be built.
Keeping balances modest and redeeming at the best available rate removes most of the exposure without giving up the benefit of participating.