$16 billion in rewards points go unused

Companies that offer rewards reap the benefits when customers don't redeem them.

By MSN Money Partner May 4, 2011 11:37AM

This post comes from Brian O'Connellat partner site MainStreet.

 

Americans are great at accruing loyalty rewards points, especially from retailers, banks and credit card companies. Unfortunately, they're just as good at not cashing those rewards in.

 

A new study from Colloquy, a marketing firm in Cincinnati, shows that about 33% of the 48 million rewards points earned by American consumers each year go unused, presumably due to neglect and misinformation, for a total value of $16 billion.

 

That news will probably make the companies that promote them happy, as the banks, credit card companies and retailers benefit from a huge de facto profit-making engine without having to lift a finger.

 

Of the $16 billion in unused loyalty points, the average American consumer squanders $205 -- enough to buy a round-trip plane ticket from Philadelphia to Miami, or to pay the average U.S. household phone bill for the month.

"American consumers are leaving significant dollars on the table every year," says Kelly Hlavinka, a managing partner at Colloquy. "This report should alert savvy consumers to a great opportunity to stretch household budgets, and to do so by simply consolidating their loyalty rewards participation with their favorite brands, making it easy to accumulate and redeem them faster than ever imagined."

Rules are hard to decipher

But one issue consumers have is trouble understanding what purchases do and don't qualify for the points. A cynic may wonder if complicated rewards rules are an intentional way for a company to make some extra cash, but it could be that either consumers are indifferent about using all their points (unlikely in this economy), or they're confused about how to leverage their rewards points, which the study's researchers feel is more likely. Post continues after video.

The study also reveals some interesting data on which industries are the most aggressive about offering rewards and travel miles. Not surprisingly, the financial sector tops that list:

  • The financial services sector is the biggest provider of rewards at $18 billion a year.
  • The travel and hospitality sector is the second-largest industry in terms of rewards at $17 billion a year.
  • The retail industry, although it makes up 40% of all loyalty program memberships, issues the smallest value in rewards at $12 billion a year.

On the demand side, membership in such programs is up:

  • The number of loyalty memberships in the U.S. is 2.1 billion, up from 1.8 billion in the 2009 report and exceeding 2 billion for the first time.
  • The average household has signed up for 18.4 programs, compared with 14.1 programs in 2009.
  • Despite the increase in overall membership, the average number of programs in which households actively participate is just 8.4.

It's up to rewards points providers to urge consumers to use their points, although that's not an alluring option when providers can save big bucks when shoppers don't use them. Plus, if you push a consumer too far, that business may never come back.

 

"If redemption equals engagement, and engagement delivers customer satisfaction and profits, then loyalty marketers should encourage their members to make the most of their rewards," Hlavinka said. "In short, redemption is good." (See MainStreet's rundown of the best credit card rewards.)

 

More on MainStreet and MSN Money:

VIDEO ON MSN MONEY

17Comments
May 4, 2011 5:56PM
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The article didn't mention that there is another reason why reward points don't get cashed in e.g. the "rewards" aren't worth it.  These programs reward those who spend the most, or those who don't spend as efficiently as they could.  I've got several hotel, grocery, and credit card reward programs that have had a piddly amount of points on them for the last two years.  Why?  Because their competitors offer better rewards and/or simpler programs/redemptions.  If I've got 200 "points" today, and I just need to spend another $15,000 at their website, using their credit card, between the 15th and 20th of the month, I'm saying "no thanks".  I imagine that the points being lost were probably worthless to begin with.  
May 4, 2011 6:23PM
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Rewards are a money making scheme plain and simple.  Sure they pay out for the diligent, but what they don't tell you is that they pass all of the rewards costs onto the individual retailers!  So at the end of the year, this $16 billion they're keeping was prepaid by their own customers (the retailers)!  We should call that what it is: theft.  
May 4, 2011 7:31PM
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do you remember the cartoon with the jackass walking toward the carrot on a stick in front of him?   we are the jackass. it's just a greedy trick.
May 4, 2011 7:47PM
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My credit card rewards can be donated to a charity of your choice. You can also get the cash instead of some gift you really don't need. Lower interest rates would be better.

May 4, 2011 9:46PM
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Since when is $16 billion 33% of $48 million? Average of $205 seems really low if it's supposed to be in billions.
May 4, 2011 7:20PM
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Well the rewards are for the most part BS. But there are good ones around.  For example flyer miles using your card as credit and not debit.  Then if you are like my friend, that's a self employed contractor. He used reward points to get a $500.00 gift card to the local retail hardware store. He also looked and spent hours looking at all the fine print and is was  basically a free gift to him from the card company.  so he won :)

 

But yeah, those rewards that you have to sign up to get the deal.  DO NOT DO IT...  just saying

May 5, 2011 10:42AM
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It's all "bait and switch"! The things I can get with points from the bank are junk, at exorbitant prices! Not worth the effort! Then you get the, "If it's Thursday during a waxing moon phase or Tuesday during the waning moon phase you can blah blah blah blah...ad infinitum, ad nauseum! Who can figure that out??? Then it's only 10 bazillion points plus $29.95 for a gift worth $10.00 and don't forget the S/H!!!! None of this is for us! It's all just another way to pinch a penny out of our pockets and make us think we really got a good deal!!!
May 5, 2011 8:19AM
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Great work by the proof reader/author.  Billions or millions? 
May 5, 2011 9:50AM
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16 Billion $, use it to pay down the natl debt!
May 5, 2011 9:58AM
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The author of this article obviously did not look at both sides of the story.

I can save the money I spend to accumulate points and go out and buy

a good set of noise cancelling ear phones.  Last I looked it would be at least

100,000 points to get a cheaper head set that would only last a month.  Yes you

can use your points to donate to charity, but again, why spend the money?

Just donate to your favorite charity and avoid the hassle of trying to accumulate

points for something you want and they take it away from you.  Been there done

that, which creates animosity with the bank and their so called services.

 

 

May 5, 2011 9:46AM
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What if we all just stop using credit cards !  Where would the banks be if we did ? It's all about money! Your money ! Is the Banks really fare with us ?

 

No I don't have a credit card :) Just a debit card. It's like being free !!!!!!!

May 5, 2011 9:36AM
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Wasn't it a few years ago they were screwing people out of there reward points saying they expired? It's hard to trust anyone now days must less a bank or a creidt card. They charge all the fees and turn around and give you a reward? For what the screwing you just got?

If you going to give me anything give me a break !

May 5, 2011 10:18AM
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It isn't just financial services that offer rewards programs. You can get them almost anywhere. I actually am in charge of our loyalty program at work, and it works really well. Though, ours is a service rewards, so basically when you spend money, you get money off of the next time you do business with us, and it's a nice perk for the customers, and it brings more business to the company.

One thing to remember is that if you have a rewards membership, and you end up no longer using that service/vendor, sometimes you lose out on points that way. Yeah, that doesn't work for the financial services stuff (since you will still probably use the credit card, etc), but if it's with, say, a grocery store in your area, and you move somewhere that doesn't have that grocery anymore, it would be very difficult to both accumulate more points, and you really couldn't redeem them anymore.

May 14, 2011 10:59AM
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I use my credit rewards points regularly. Don't bother with the gift cards or whatnot...it's just a way to get you to spend more money than you would have without. Both of my cards offer statement credits. It isn't as satisfying as getting something tangible, but it is $100 you don't have to pay that month.
May 5, 2011 12:12PM
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CommentFan - why are you paying annual fees?  There are lots of cards out there w/ no annual fee.

 

My bank is dropping debit rewards 7/31, and I am not happy.  I got a lot of good stuff over the years - gift cards, iShuffle, stick blender, car vacuum, etc.  No S&H fees.  Sounds like a lot of folks have crappy programs. I don't find my programs complicated.

 

I like my AmEx Blue.  If you're short a few points, you can advance some at no cost and can take up to a year to earn them.  I then just pay a few monthly bills w/ my AmEx, then pay them off as soon as they post from money I already had in my checking.  Very helpful when I was going on vacation and was just a few hundred points short on a $100 towards car rental. 

May 5, 2011 10:30AM
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I'm so glad this article appeared.  I have a credit card that I no longer use, but totally forgot that I had rewards points accumulated that I'd never used.  I went to the website immediately to redeem my points...I've got $120.00 coming my way!  Thanks again for this article!
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Some may not acquire enough points on their cards to actually get something out of them, especially as to airliner miles and with he higher amounts of points needed to get a flight now, fees by airlines to use points for airline flights and like issues. On my Citi card, and for many on some points cards, the annual fees can be $50-100/year thus negating the points benefits or even meaning you lose on points. My points plan on a Chase card is good in that I can just get cash back in increments of $25, the time to use points is quite long and I spend enough to gain the points much more than the $25 annual account fee.
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