Rethinking Credit Card Loyalty: Kevin O’Leary’s Inflation Warning and Its Investment Implications

Kevin O’Leary, the sharp-tongued investor known for his no-nonsense approach to finance, has issued a stark warning: credit card rewards programs are “rigged,” with loyalty points inflating faster than the dollar. His advice? Cash out fast—before the value evaporates. For investors, this perspective offers critical insights into consumer behavior, banking sector risks, and the broader economic landscape.

O’Leary’s stance is rooted in hard data. He points to a 2025 surge in redemption thresholds for airline miles, where a free flight to Hawaii now requires 170,000 points—a 567% increase from just two years ago. This trend, he argues, reflects a systemic devaluation of loyalty points, driven by companies inflating redemption costs to boost profits. “The second you get them, do not hold on to them,” O’Leary insists, advocating for immediate redemption of rewards on everyday purchases like Amazon orders to avoid losing value.

The Math Behind the Madness

The inflation of points is outpacing traditional currency devaluation. For example, the U.S. Consumer Price Index (CPI) rose 2.9% annually in early 2025, while the effective cost of redemption for airline miles has risen far faster. This creates a lose-lose scenario for consumers: holding points risks losing their value, while chasing rewards traps users in cycles of spending to accumulate more points.

Investors should note that banks and credit card issuers benefit from this dynamic. High redemption thresholds incentivize consumers to keep balances on cards, generating interest income. For instance, the average credit card interest rate hit 21.76% in 2024, with total U.S. debt surpassing $1.17 trillion—a goldmine for banks.

Visa (V), a major player in the credit card ecosystem, has seen its stock climb 28% since 2022, outpacing broader markets. This reflects growing reliance on credit, even as consumers face rising costs.

O’Leary’s Playbook: A Defensive Strategy for Investors

1. Focus on Cash-Back Cards: O’Leary dismisses affinity programs (e.g., airline miles) in favor of cards offering 5–6% cash-back rewards on everyday purchases. Companies like American Express (AXP), which dominate premium cash-back offerings, could see sustained demand.
2. Beware of Loyalty-Driven Sectors: Airlines and travel companies reliant on miles as a revenue stream face headwinds. Delta (DAL) and American Airlines (AAL), for instance, have seen weak demand for premium economy seats as travelers prioritize affordability over status.
3. Monitor Banking Sector Risks: While banks profit from high-interest debt, rising defaults could emerge if inflation persists. JPMorgan Chase (JPM) and Bank of America (BAC) have already set aside $1.2 billion in reserves for potential loan losses in 2025.

The Broader Economic Picture

O’Leary’s critique extends beyond consumer finance. He blames U.S. government spending—particularly pandemic-era stimulus—for fueling inflation, arguing that 50% of the $5 trillion allocated was wasted. This stance aligns with his warnings about Canada’s economic decline, where stagnant GDP and high debt have deterred foreign investment.

For investors, this paints a mixed picture:
- Winners: Banks and payment processors (e.g., Mastercard MA) benefit from increased credit usage.
- Losers: Travel and luxury sectors (e.g., Starbucks SBUX premium memberships) face pressure as consumers prioritize cost-cutting.

Conclusion: Playing the Game Wisely

O’Leary’s “cash out fast” mantra isn’t just advice for consumers—it’s a roadmap for investors. By prioritizing cash-back rewards, diversified credit portfolios, and banks with strong risk management, investors can navigate an inflationary environment where loyalty programs are losing their luster.

The data underscores urgency:
- 93% of fraud cases stem from online breaches, making O’Leary’s two-card strategy (one for online, one for in-person) a prudent move.
- 2.5% monthly savings via immediate rewards redemption could compound into significant returns over time.

In a rigged game, the winners are those who act swiftly—and think critically.

This trend line shows how interest rates have consistently outpaced inflation, a key factor in the banks’ favor—and a red flag for borrowers.

Investors ignoring O’Leary’s warnings may find themselves on the losing end of a system where the house always wins. The question is: Will you play along, or adapt first?