You may not be fully aware of it, but you’re probably sitting on your own personal treasure hoard: a stash of airline miles, hotel points or reward points you’ve earned through your credit cards. Are you wasting your reward points and frequent flier miles?
According to statistics compiled by Points.com and its parent Points International (PCOM), a company specializing in helping consumers trade, exchange and redeem reward points, the average American is hoarding more than 61,000 reward points through various programs. Americans have more than 2.65 billion loyalty memberships — 21.4 per household.
This would be fine if we were spending those points — but we’re not. According to a report by Forrester Research, only 16 percent of us redeem the points that we earn each year. Why do we love reward points? Is there a danger in hoarding them? What should we do with our points as our balances continue to grow?
Are You Wasting Reward Points You’ve Earned?
Why Do We Love Reward Points So Much?
Getting something for free is a big allure of reward points and loyalty programs. I love that my airline-branded credit card allows me to check a bag for free. Companies view reward programs as marketing by gamification.
If businesses can make patronizing them into a game for their customers, they’ll be more likely to do what it takes to advance to the next level. And of course, these programs inspire brand loyalty. I’m a huge fan of Fitbit.
I’m always striving for the next badge or level with my fitness goals through the site and its devices. I’m also addicted to checking in to the places that I frequent on Foursquare. It drives me crazy when someone ousts me as the mayor of one of my favorite haunts.
Gamification is going on with reward points themselves. Companies have found that we desperately want to get to the next level of rewards. That’s why companies have different colored credit cards and exclusive levels that offer even more freebies to loyal customers — though usually for a price. And we are dreamers.
We dream that our frequent flyer miles and hotel reward points will go towards some exotic trip. But in actuality, we’re more likely to wind up using them for mundane trips like to flying to cousin Phil’s wedding in Des Moines, says Christopher Barnard, president of Points.com.
The Dangers of Not Spending Your Reward Points
It’s important to stay abreast of the fine print and ever-changing rules. “Make sure that you are up to speed and current on program communications,” says Barnard. “That is an easy way to get more out of your choice of reward points programs.”
There is also a danger of spending simply to earn rewards, which what most such programs were designed to encourage. “With credit cards, I always suggest that people should always use caution,” says Michael H. Baker, a certified financial planner with Vertex Capital Advisors in Charlotte, N.C. “Many of the rewards can be useful to certain consumers, but you must stay on top of your game and play by the rules. I would only encourage someone to use a rewards card if they can diligently pay off the balance every month.”
Note: This article has been reprinted with permission from AOL Daily Finance.