The use of loyalty/rewards points to pay for purchases began as a value-add to card programs. For example, there might be a set of designer luggage or some such item that caught the member’s eye and was worth a pile of points. But the real reward people tended to work toward had long been airline tickets, seat upgrades or free rooms at hotels – until now.
With air travel virtually grounded and hotels sitting mostly empty, an ocean of rewards points is being retasked for other purchases, as issuers seek to stabilize credit card portfolios with offers and program modifications meant to retain card customers through COVID-19.
Amazon has lately been prompting members to link their favorite rewards cards to their Amazon Prime accounts, enabling purchases to be made entirely with points from an eligible card if the consumer wishes. The Amazon integration allows Prime members to check points balances on cards before deciding how to pay for purchases.
The eCommerce titan also recently promoted its pay-with-points arrangement with American Express. “If you’re targeted for this offer, you can get up to 40 percent off your Amazon purchases when you use at least one AmEx point to pay. While this is a single promotion, there are two variations: If you’re targeted for a 30 percent discount, you’re capped at a $30 savings. But if you’re lucky enough to score the 40 percent offer, you can get up to $50 in savings,” CNN reported.
Points as a ‘Crisis Currency’
Paying with points isn’t exactly new, but it’s getting new purpose as credit use plummets, debit use rises and cash-strapped Americans begin to understand that the stored value in accrued loyalty points is a form of “crisis currency.” And platforms are making it easier than ever to spend them.
When PayPal joined the party in June, it was clear that repurposing loyalty points for pandemic payments would be a big deal – at least as long as all those stored points lasted.
“More and more people across the country are turning to their credit card rewards as a helpful and easy way to make their dollars go further,” Jill Cress, PayPal’s vice president of consumer marketing, said in a statement. “And in the current environment, two-thirds of Americans (66 percent) now view these rewards balances as a way to buy the things they need, such as groceries and other essentials.”
A PayPal study also found that nearly 40 percent of cardholders don’t even know how many points they have, calling that “an opportunity for more people to uncover funds [that] could extend their budgets and help them buy the things they need most.”
PayPal’s Pay with Rewards option functions much like the Amazon program, converting and applying loyalty program points at checkout as currency. In many ways, that’s exactly what points are becoming, exceeding the narrow uses for which they were employed until now.
Pointing the Way to Recovery
Major financial institutions (FIs) have been rolling out pay-with-points variations for the past two years or so, as payments preference has expanded into the customer-experience realm.
We can expect to see more of that in the near term, as issuers look for ways to help cardholders recover from COVID’s harmful impacts on business and personal finance. Like so many things, it’s beginning to look like paying with points is an idea tailor-made for these tight economic times.
Fortunately, when COVID hit, the capabilities already existed to convert loyalty points into things like groceries and cleaning supplies. That’s been a lifesaver for many consumers, some of whom were already members of pay-with-points programs.
Citi got out ahead of the trend a year ago, announcing that its ThankYou cardmembers would be able to use points for purchases. “This launch follows other recent enhancements to Citi’s ThankYou Rewards Program, such as the addition of numerous Points Transfer partners, including Avianca LifeMiles and JetBlue TrueBlue, and new Shop With Points merchants, including Best Buy, Expedia and Amazon,” PYMNTS reported at the time.
Similarly, Capital One partnered with Amazon late last year for a points redemption option. “Cardholders will be able to use as few or as many rewards as they wish for Amazon.com purchases. Cardmembers can enroll by adding a Capital One rewards card that is eligible to their Amazon accounts. They will be automatically enrolled if they already have an eligible card linked to their Amazon accounts,” PYMNTS noted at the time.
We’re always on the lookout for opportunities to partner with innovators and disruptors.
Learn More