To avoid the holding rule you must cancel 31 days or more before arrival date, and points will go back into the account in the same state they are in the reservation (banked points remain banked, borrowed points remain borrowed, and regular use year points remain regular). If you cancel 30 days or less before arrival, all points in the reservation go into holding, including those regular points, and thereafter expire at end of the use year and can be used to reserve a room only at 60 days or fewer before date of arrival, something often difficult to do.
Therefore, if you cancel at least 31 days before arrival those Dec 2021 borrowed points will go back into your account as borrowed points which must be used for a trip that ends by Nov 30, 2021.
Currently, there are special Covid-related rules in place. The holding rule has temporarily been waived, meaning you can cancel within 30 days out and not go into holding. Also, borrowed points in a cancelled reservation are being returned to their original use year.
A problem with both those temporary rules is lack of definition and clarity. Those temporary rules have no stated end date or stated period of time in which they are even likely to continue, e.g., the possibility exists that those rules could still be in effect at 31 days from your arrival date but then, the next morning, 30 days out, you could learn that the temporary rules have been ended, and have all your points go into holding if you cancel . Moreover, there is lack of clarity as to what reservations the temporary rules apply to, e.g., that the return of borrowed points to their original use year actually applies to your Dec 2020 reservation and points borrowed from Dec 2021. In essence, you likely should not make assumptions based on the temporary rules in deciding when you should cancel or the impact of doing so.
