As they say on the Twitter….

I don’t know who needs to hear this, but:

Miles and points, as a hobby, is a game at its core.

Really, truly, and fundamentally. Loyalty programs exist to serve the companies trying to gain/preserve brand loyalty. Those who get very invested in loyalty programs as consumers look for ways to extract maximum value from those programs.

When things are setup properly, meaning that the program itself is well conceived and well run, both sides win. In the optimal scenario, the program does what it was made to do. It increases brand loyalty, wherein the consumers feel a brand attachment and have positive associations with the brand. They are happy to spend with the brand, even if the competition is cheaper. This could get a loyal Starbucks Card user to look for a Starbucks when they are driving right by a Dunkin’. (Of course, other reasons like the taste of the coffee will factor in as well.)

Loyalty programs don’t take place in a vacuum, of course. A great brand can allow for that brand to offer less in the way of rewards where a brand working on overall perception may need to giveaway more. Delta is a great example. While they’ve been actively working to lower the monetary value you can get cashing in Skymiles, they’ve been noticeably hard at work improving both the onboard experience and the elite member experience (Skymiles currency notwithstanding).

There are massive extremes, of course.

At one end of the consumer spectrum:

There are those that pay no attention to a loyalty program at all. They are loyal to the brand for other reasons. Or not loyal. They probably are a member of the loyalty program and know it exists, but simply assume they are getting “something.” The effect of the loyalty program is effectively neutral.

At the midpoint:

Here lies the vast majority of program members. They know parts of the program well. They are excited to hit program status tiers and thresholds. They feel appreciated (if it’s a well crafted loyalty program). The program enhances the relationship between the customer and the brand.

Starbucks is a brand that does things very well here. The Starbucks card and subsequent digitization of both payments and ordering via the app, along with the stars earned and the way you can redeem the stars for drinks of outsized value (but very minimal cost to Starbucks), fosters both tremendous brand loyalty to Starbucks and provides liquidity for Starbucks to the tune of around $1.6 Billion in customer funds on hand via Starbucks Card balances. (Source).

This is where a brand wants you to live. This is where there is the most “mutual benefit.”

Obsessive Loyalists:

A consumer that is a “super fan” of a loyalty program (not to be confused with a pure super fan of the brand) is often one of the brand’s most loyal customers, but how profitable is a super fan? I don’t have the hard data but I suspect in this band we start to see a split form between those who are very high profit and those who actually cost the brand money.

You’d have to look at revenue minus cost to service the customer minus all associated loyalty program costs to see profitability, or lack thereof.  This is because the super fan is most likely to try to game the system, armed with deep knowledge of the program and any potential ways to maximize the program. Before Starbucks transitioned to the current Star system, you earned free drinks based on number of visits.

So people quickly got wise and would order 4 drinks and would have the cashier ring things up one at a time, slowing down ordering times in store and costing the Starbucks Rewards program money.

It extends beyond loyalty as well. Many brands made headlines several years ago when they told customers with abnormally high rates of merchandise returns that they would no longer be allowed to return, well, anything.

The Effect of The Internet On “Optimizing”

The Internet is certainly a double edged sword for both sides. Someone discovers a loophole and shares it online. Someone reading that shares it somewhere else. A blog writes it up. Another blog links to the first blog. Message boards discuss. And soon, from 1 person figuring it out you have thousands or tens of thousands of people doing the same thing.

What would be a marginal blip for a company quickly becomes a gaping hole. Most often, this simply results in the program moving goalposts. They adjust. The game of cat and mouse continues.

Group Think and FOMO

As well, because everyone is online reading about what other people are doing, it creates a bit of group think mentality. If so and so is doing XYZ, it must be “OK.”  But then some people are doing ABC also… is that OK? And if you don’t ever do anything “grey area,” are you playing fair or actually just leaving points on the table.

Clearly there is a line, but where is the line?

I can tell you one thing after so many years of this:

The line is just past where you are standing.

It’s human nature. You can justify up to a certain point. You feel that A and B are fine. C is over the line and you won’t play the game that hard. Someone else has a different line. And so on.

Who knows where the line ever is? I saw many people chastising other people for Amex self-referrals – that they should have known it was wrong – but I can almost guarantee those chastising were doing something else that could or could not be considered “wrong.”

I’m not talking about breaking actual program rules or terms. If they say you cannot do X and you do X, it’s safe to say you are in the wrong. I’m talking about the true grey areas where it’s not violating any rules but, you know, feels like a grey area.

This may be a good time to step back from group think and decide for yourself where your risk tolerance lies. Because, increasingly, the penalties for crossing imaginary lines, where there are no actual terms violated, are becoming harsh.

Perhaps quite a bit harsher than they should be. I think some companies are finding themselves caught off guard when they peek under the hood and are alarmed by something they’ve missed, perhaps for quite some time, and overreact.

Unless someone has violated written terms, I don’t think a lifetime ban for one offense is either fair nor the right move. It’s lighting a house on fire to kill a bug. A lifetime is a long time, and people grow.

But I don’t control these things and, suffice it to say, your relationship with these companies seems to be on the line now in ways it never was before – and I think that is because of how much this has all scaled in recent years.

Bracing for Impact

2019 certainly feels like a year that this hobby has seen a fair bit of shakeouts. For a while, people were only worried about a Chase shutdown. They were pretty rare by all accounts. But then Amex embarked on a fairly widespread shutdown of customer accounts for reasons that weren’t super clear, but seemed to be directly related to activity like self-referring oneself for another Amex card. We never found out if this was or was not a clear reason, but it was certainly “interesting” in that self-referring both worked in the Amex system and was not called out in any terms and conditions as forbidden. One theory involved those with multiple versions of the same card. Then, soon after, Amex sent business owners targeted offers to apply for a 2nd Business Platinum card when they already had one.  And yet people were chastised for having two Platinum cards!

Until recently, it was common practice to buy airline gift cards with Amex incidental airline credits. Even the venture-capital-backed industry behemoth The Points Guy advocated this.  Was that over “the line?”  I have no idea anymore.

How Bank Risk Exposure Affects the Miles and Points Game

One thing that you really have to pay attention to now is that the more our economy keeps going on one of the best streaks of “up and up and up” ever, the more we have the potential to fall.

Should there be a massive economic correction, banks need to be prepared. And what I see happening over the past year is a tightening up of consumer accounts that look risky.

I mean they look risky to “risk management” – first to algorithms and then to actual people working in risk management.

Behavior that many in miles and points consider perfectly normal may look like risky behavior to a bank.

One reason I advocate not moving “too quickly” (and again, that’s always a speed you have to determine yourself) when you start out is because applying for card after card after card in a very short timeframe makes you look risky. Even if you have perfect credit, this can appear to a bank that you are a “bust out risk

Overlap with Profitability and Risk

I think what we are seeing now and will continue to see more of – especially if the economy worsens – is twofold. Banks cutting down on perceived risk, yes, but also more tightening up of loyalty program profitability.

It’s inevitable. This all has gotten so big that it’s “on the radar” now.

I think they are doing “prep work” now. Looking for ways to increase general program profitability and get rid of people they see as a drag on their bottom line.

You know that Amex “bonus eligibility popup” that advises people that they can apply for a card but won’t get a bonus? I think (but don’t know) that it is directly correlated to your profitability with Amex. If you get a lot of bonuses without a lot of correlating spend, their computers know you are costing them money.

Big data has allowed companies to really laser focus on the details of customer accounts in ways they never could before.

In Summary

I don’t have any grand advice here. I can’t tell you where “the line” is – because I don’t know myself.

But I think it’s time to take stock of your investment in miles and points and expect that more shakeouts are coming and, if it’s not already too late, think about the long game.

What are your thoughts?

Tell me here, on Twitter, or in the private MilesTalk Facebook group.

You can find credit cards that best match your spending habits and bonus categories at Your Best Credit Cards

New to all of this? My “introduction to miles and points” book, MilesTalk: Live Your Wildest Travel Dreams Using Miles and Points is available on Amazon and at major booksellers.


  1. Great, unbiased article Dave.

    I’d add a small other nuance with the recent wave from AA. No longer do we have to worry only about the banks.

    As the relationships between bank and vendor have strengthened; we’re in uncharted territory. We have never even considered companies such as Marriott, Hyatt, Delta or AA would close your loyalty account based on your dealings with a bank. But that’s a new reality that we will likely see again in the near future.

    And what could be scarier? Those loyalty programs sharing their findings with their partners. Shutdown from AA? What if they push to have you shutdown from their OneWorld partners? If you think that’s not a reality, I’d think again. Unlike banks, whose loyalty programs are regulated; the airline and hotel loyalty programs have no such regulation.


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