One of the great debates within the frequent flyer community is whether or not it makes sense to hoard miles, perhaps with the hope of one day redeeming for a pricey international First Class adventure for the entire family, or to redeem miles and points quickly in an effort to beat an inevitable devaluation. Like everything award-travel related, it's entirely up to the traveler and collector, but there are some pros and cons of each to consider. Let's explore each option, to see what makes the most sense for you.
Build up a balance
The best reason to collect more and more miles without making a single redemption is if you're saving up for an "aspirational award." Generally, these are inter-continental flights in a premium cabin, be it in Business or First Class, for more than one passenger. Generally, it will take months or years to save up for this type of award, so there's really no other way to go about doing it if you're planning to book every ticket using your own mileage balance.
One way to avoid a lengthy delay between when you first begin building a balance and when you have enough for a big redemption is to split the earning responsibility with friends or family members who are planning to join you on your aspirational trip. Credit card sign-up bonuses can go a very long way to boosting your balance, and if everyone in your group joins forces, you'll be able to book your adventure much more quickly. This strategy is most useful after an airline announces a devaluation, so you can increase your balance and book an award before the rates go up significantly.
If a big trip is not in your future, however, it doesn't make sense to rack up hundreds of thousands of miles before booking an award. Some frequent flyers collect miles simply for the purpose of collecting, and often miss out on great redemption opportunities. Instead, you should use your miles periodically for last-minute trips to visit family or a spur-of-the-moment vacation that would otherwise be priced out of reach.
"Earn and burn"
Generally, it's recommended that you use your miles as you earn them. You should still build up your balance if you're planning for a specific redemption, but don't purchase miles or go out of your way to acquire miles that you don't need through other means. Once you have a reasonable number of miles in your account, it's time to start planning your next getaway. Take a long weekend to discover a new domestic destination, or jet down to the Caribbean for a few days of rest and relaxation. What you shouldn't do is use your miles and points for merchandise, unless you don't anticipate building up a large enough balance for a flight or hotel room with a particular airline or hotel program.
While you should ideally use your frequent flyer miles and hotel points whenever you have enough to redeem, fixed-value points, such as those you'll earn from Barclaycard, Chase or American Express retain their value as long as you're planning to use them for a cash-equivalent redemption, and are only devaluated at the standard rate of inflation. In other words, 10,000 points that are worth $100 today will carry the same cash value a year down the road, but due to modest inflation, their purchasing power may decrease slightly over time.
You should hold fixed-value points just as you would cash, however, and use your frequent flyer miles and hotel points first whenever the redemption rates seem reasonable. If you're working towards a specific elite status level, however, it may make more sense to use fixed-value points over airline miles, so you can earn elite-qualifying credit with the airline.