Consumer Cents lost in Membership Reward Programs

Credit card loyalty programs can help you stretch a dollar - think again, nothing in this life is truly free.

American Express CEO, Ken Chenault revealed in an MSNBC interview that over the last three months, six million American Express “Pay for Points” membership reward points have been redeemed towards purchases on Amazon.com. At first glance, this is great news for the consumer. Chenault explains that the “Pay for Points” program “is more of a social currency,” he said. “We’re moving to evolve our company— it’s a digital transformation.”

But consumers are getting the short end of the stick in this digital currency realm, according to John Evans, www.Credit-Land.com credit card rewards programs analyst. Membership reward points are acquired when consumers set up a rewards account and begin purchasing with that card. For each dollar spent, a point is put aside. The points can then be redeemed for hotel accommodations, free flights or new products. According to the web site, the American Express Membership Rewards program is “one of the most generous rewards schemes in the world.” Last year, American Express teamed up with Amazon.com to give consumers more options when spending their rewards points.

For each American Express “Pay for Points” point earned, consumers receive .07 cents on Amazon.com as opposed to a full cent on other websites like Zappos.com. One thousand membership points equals $7, or each point equals 7/10 of a penny that can be spent at Amazon.com, according to an American Express spokeswoman.

“Our point conversion rates vary across different types of redemption options and partners,” said Joshua Berwitz, vice president of Membership Rewards, in a statement sent to the New York Times. “For example, there are different costs associated with cash redemption options than other types of rewards.”

A www.Credit-Land.com analyst explains that consumers probably get better deals on gift cards as opposed to outright purchases, because consumers often spend more than face value when using gift cards. While the benefit is still there, credit card companies have angled it in such a way that consumers believe they are profiting.
For some consumers, the element of convenience supersedes the lacking conversion rate. Having access to millions of products with points you don’t remember earning is enough to give consumers purchasing amnesia. Is convenience worth .03 cents? What’s worse is that Amazon.com doesn’t have the lowest conversion rate, at Ticketmaster.com each point is worth .05 cents. Sure, it does beat waiting in those long lines. But do your part as a consumer and find out the best way to spend your loyalty points!