Why Loyalty Programs May Cost You More Money In The Long Run

Loyalty programs are designed to give you perks for sticking with a particular airline or store, but because of the way your mind works when making decisions, you might end up saving more money by avoiding them all together.

Psychology Today has dissected how loyalty programs work, and they've found that we're often willing to spend more money in the name of accruing more points:

Because you may pay more for some flights on that airline in order to stick with the particular carrier, you may pay more for those simple comforts than you might be willing to pay if they were just offered to you directly. That is, you might not pay $40 for the opportunity to board early if it were offered to you at check-in, but you might pay $40 more for a flight on an airline where your loyalty club membership allows you to board early.

The idea of loyalty programs is to help you develop a habits that include the companies offering them. The more you participate — meaning, the closer you get to a reward — the more you'll tend to appreciate the program and begin to form these habits.

Loyalty programs aren't inherently bad, however. So long as you don't let the draw of points lead you to spending a bunch of extra money, they can be used to your advantage without creating bad habits.

The psychology of loyalty programs [Psychology Today]

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Comments

    The classic is I know of quite a few people who pay their bills via credit card, despite being charged 1% extra, so they can accrue the points.

    But the points normally only accrue at half the additional charge ie 0.5%.

    I have been on flybuys for over a year now and I am no where near enough points to actually get anything from it. You have to buy like a house before you can redeem a kettle.

    Loyalty program rarely pay off from my POV. I agree 100% with this article that it's often just better to buy the item you want from the store that is selling it cheaper rather than buy it from the store with the rewards program.

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