Written By Gina Roberts

Many Canadians are signed up for loyalty programs because being rewarded for everyday purchases seems beneficial. They add to the ‘shopping experience’. Just swipe for points and savings; but there is a danger to this simple method.
PIAC’s “Customer Loyalty Programs: Are Rules Needed?” report shows that ease of use is a determining factor in how much consumers enjoy a loyalty program. In response to this, some businesses have tied their programs to credit cards so consumers can gain points easier and faster to spend on rewards.
Rewards vary depending on the program: some exchange points for discounts and some for items or services. Because points are redeemable, many consumers using these programs view points as a currency interchangeable with money. In reality, the value of these rewards in relation to consumer expenses can be less than 2%, which means consumers must spend far more than the reward’s worth to see them.
By attaching loyalty programs to credit cards consumers may be spending money they don’t have to get these rewards.
The report identified that consumers with loyalty programs usually spend money at particular stores to gain points and are encouraged to use their program card. When it’s is attached to a credit card it’s easier to use and consumers can pay at the same time. This becomes dangerous as people will make more purchases with credit, which garners interest, and have to pay off a debt. On top of this, special offers and promotions associated with loyalty programs encourage consumers to make additional purchases with their cards in order to get more points. This can lead to substantial credit card debt, just to gain points and rewards at a rate of 2% or less.
Younger (ages 19 – 29) credit card users with loyalty programs may be particularly exposed to credit debt because they’re more receptive to receiving information on promotions, special offers, and deals, as well as make purchases, than other users. Furthermore, this age group is more connected with social media and networking technologies which businesses are utilizing more and more to reach consumers, giving this group easier access to deals and offers wherever they go.
Consumers should be aware of their spending habits, but those with loyalty program affiliated credit cards should pay particular attention. The point totals may not add up to the costs.
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