Southwest Rapid Rewards points used to be worth 1.69 cents each. Starting March 31, 2014, they will be worth about 1.44 cents each.
What is the exact devaluation?
Among the Six Types of Frequent Flyer Miles, Southwest has a fixed-value program. For every dollar of the “Wanna Get Away?” base fare, you have to spend 60 Rapid Rewards for an award ticket.
So a $220 Southwest ticket with a $200 base fare would be 12,000 Rapid Rewards + $5 in taxes as an award. Here’s How to Book a Southwest Award.
For bookings made on or after March 31, 2014, the redemption rate will be 70 Rapid Rewards per dollar of base fare according to The Points Guy. That $200 base fare goes from being a 12,000 point award to 14,000 points.
Interestingly, Southwest is not just devaluing its existing points, which most of us get from credit cards. It is also devaluing flying Southwest.
You currently earn 6 points per dollar spent on Southwest “Wanna Get Away?” fares and then need 60 points per dollar to redeem those points. That works out to earning a 10% rebate on your Southwest flights through the Rapid Rewards loyalty program.
After March 31, 2014, you will still earn 6 points per dollar but need 70 points per dollar to redeem. That cuts the rebate from flying to 8.6%. I can understand a devaluation of credit card points even if I don’t like it, but I can’t see why Southwest would want to cut the rebate percentage for its flyers. I’m surprised the earning rate is not being bumped to 7 Rapid Rewards per dollar spent on Southwest base fares to keep the rebate percentage of flying constant at 10%.
This is bad news for those of us holding Rapid Rewards and Ultimate Rewards, since they transfer 1:1 to Southwest. But the bad news illustrates why holding transferable points is better than holding points from a single airline. While Rapid Rewards used past March 31, 2014 were cut in value by 17%, Ultimate Rewards used after that date have most of their uses (like transfers to United, Hyatt, or British Airways) unaffected.
This illustrates one of the main points I made in Which Miles Should You Stockpile?
How does this devaluation affect you? How big is your stash of Southwest points? Was this enough notice?