The Hidden Dangers and Pitfalls of Loyalty Programs: What Every Consumer Should Know

Loyalty programs promise rewards, perks, and savings—but behind the glossy marketing, there are real risks that can cost you money, time, and peace of mind. Here's what every consumer should know before getting too invested in points and perks.

Program Downgrades and Devaluations

Loyalty programs can change their terms at any time, often with little warning. One common pitfall is the devaluation of points or miles, meaning you suddenly need more points for the same reward. For example, major airline and hotel programs like United MileagePlus, Marriott Bonvoy, and British Airways Executive Club have all increased redemption rates or added new fees in recent years, making your hard-earned points less valuable overnight5.

Even worse are tier downgrades. Some programs immediately drop your status level if your points balance falls below a threshold. Imagine joining a program's Gold tier with 350 points, redeeming 200 points, and instantly being bumped down to Silver or even Bronze—losing access to benefits you may have counted on1.

Program Terminations and Loss of Points

Programs can be discontinued, merged, or overhauled, sometimes causing members to lose their accumulated rewards. Points can also expire if you don't use them within a set period or if your account is inactive. For example, many credit card rewards vanish if your account is closed for inactivity, or if you miss payments or default on your card2. Airline miles may expire after 18 months of inactivity, and some programs have arbitrary expiration dates that can wipe out your balance if you're not vigilant2.

Security Risks: Hacks and Loyalty Fraud

Loyalty accounts are prime targets for hackers. In 2018, cybercriminals stole millions of frequent flyer miles from major airlines and sold them on the dark web3. In 2023, a major loyalty program in India was hacked, with a criminal diverting customer rewards to his own account over several months3.

Phishing scams are also rampant: scammers send fake emails or texts warning that your points are about to expire, tricking you into giving up your login details. Once inside, hackers can drain your account, change your password, and leave you locked out and empty-handed6 3.

Complicated Terms, Restrictions, and Fine Print

Many programs have complex rules that make it hard to redeem rewards. Blackout dates, minimum redemption thresholds, hidden fees, or confusing processes can prevent you from getting the value you expect. Some companies profit from 'breakage'—the points that go unused because redemption is too difficult or restrictive2.

Lack of Legal Recourse and Consumer Protection

Loyalty programs reserve the right to change terms, devalue points, or terminate accounts—often without warning or a clear path for dispute. Recent regulatory investigations in the US and lawsuits in other sectors show growing concern over unfair or deceptive practices, but legal protections for consumers remain limited4. If your points disappear or the rules change, you often have little recourse.

Erosion of Trust and Customer Disillusionment

When programs devalue rewards, change terms suddenly, or fail to protect accounts, consumers lose trust. Over-reliance on loyalty can backfire, leaving you with less value than you expected and a sour experience with the brand5 4.

How to Protect Yourself

Read the fine print: Know the rules about expiration, redemption, and account status.
Stay active: Use your accounts regularly to avoid expiration or closure.
Monitor your accounts: Watch for unauthorized activity or sudden changes in your balance.
Use unique passwords: Protect your loyalty accounts just like you would your bank accounts6.
Redeem often: Don't hoard points—use them before they lose value or disappear5.
Know your rights: Follow regulatory developments and be ready to advocate if you feel wronged.

Loyalty programs can offer real value, but only if you stay informed and vigilant. Don't let your hard-earned rewards vanish—know the risks, and protect what you've earned.