Reap your rewards points while you can

They can be taken away before you have a chance to use them.

Andrew Hepburn 18 November, 2016 | 6:00PM
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Every day, Canadians collect rewards points when they spend money. From buying groceries to filling up the car at the gas station, the opportunities to earn seem endless. And of course, the allure of all these points programs is the rewards offered. Whether it's the prospect of free merchandise or a plane ticket, people are understandably enticed to participate.

There's just one, very big problem. Those valuable points you've been saving up for something special? There's no guarantee they'll be there when you want to use them.

Put yourself in the shoes of someone who's been diligently collecting Air Miles with the hope of taking a nice vacation one day. Back in 2011, the program announced that effective Dec. 31, 2012, all accumulated points would expire in five years. Previously, there was no expiry date.

Following the initial announcement in 2011, Air Miles made little effort to remind collectors of the coming point expiry. There were no subsequent letters or press releases to call the public's attention to the change. Many consumers only became aware of the pending expiration recently due to increased media coverage as Dec. 31 of this year comes into focus. The result, to be expected, is that many people are furious with Air Miles for arbitrarily taking their points away.

It's not just the expiry date that has collectors upset. Before 2012, any Air Miles a person earned could be used either for travel or so-called cash rewards. With cash rewards, consumers could exchange miles for things like gift cards to various retailers. But alongside the five-year expiry announcement, Air Miles also mandated that rewards miles could not be used for cash rewards unless a collector specified it. The bottom line is that all "unspecified" miles and miles earned prior to 2012 reverted to what Air Miles calls its "Dream" rewards category.

In fact, it seems like some of the "deals" offered in the Dream category aren't really deals at all. Personal finance blogger Robb Engen wrote an open letter to Air Miles in the summer, lambasting them for the changes to the program. In the letter, he showed that while it was possible to get a $100 grocery gift card from the Dream category, it really wasn't worth it. A collector would have to redeem 50 miles and pay an added $95 in cash. With 50 Miles being worth $5.26, that means a collector would be paying $100.26 for a gift card valued at $100.

In the case of Air Miles, rewards points are expiring. But there are other ways that consumers can find themselves squeezed by rewards programs to which they've been loyal. Take the case of what happened to card holders of the TD First Class Travel Visa last year. Prior to the change, someone with this card could redeem 200 TD travel points for $1 in travel-related expenses. Importantly, a consumer could book a trip any way they wanted with the card and then use the points to pay it off. With the change, however, unless a card holder booked through TD's Expedia portal, $1 in travel rewards would now cost 250 points. In effect, TD, to the dismay of many, devalued accumulated points by 25%. (They did, after an outcry, postpone the effective date by three months to allow card holders more time to spend points at the prevailing exchange rate).

Even without an announced change to a rewards program, a participating consumer can find that their points have been taken away, simply due to inactivity. Indeed, according to the terms and conditions of the Shoppers Drug Mart Optimum program, if you fail to acquire any points for a full calendar year, you can lose all accumulated points.

The bottom line for consumers

Many people probably regard their rewards points as akin to cash. But as pointed out in the examples above, points can be devalued or even removed entirely, leaving a collector angry and feeling betrayed.

You might be wondering how rewards points can simply be taken from you. The answer may be surprising: It's something you essentially agreed to when you signed up, even if you didn't realize it. If you carefully read the fine print of the agreements governing rewards programs, you'll see that the company in question has the right to unilaterally make changes to the way it operates.

This isn't to say that all your rewards points are bound to become worthless. For most companies that offer these programs, it's not in their interest to do so. They benefit from having a loyal customer base, so a massive devaluation or point removal could be very counterproductive. At the same time, your asset (the rewards points) is a liability to the issuing company. So you have to be aware of the possibility that it may make a change that's to its advantage, if it's worth it from a business perspective.

The possibility that points can be devalued or expired underscores another lesson for the consumer: use them or risk losing them. In other words, rather than hoarding points, a better move is to always be on the lookout for ways to cash in rewards. That way you know you're at least getting something in return for the money you've spent with the program. This is particularly true if you already have a substantial number of points with which you've been planning on making a major purchase. The sooner you book that vacation, the sooner you can stop worrying that you won't be flying on points after all.

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About Author

Andrew Hepburn

Andrew Hepburn  Andrew Hepburn is a freelance financial writer based in Toronto. He writes about investments, market trends and personal finance. He has written for Maclean's, the Globe and Mail, and Canadian MoneySaver.

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