A little loyalty goes a long way

A new marketing trend has emerged in the business world that targets consumers of all demographics: Travelers; shoppers; businesspeople; soda drinkers. Advertisements for large scale rewards programs have flooded department stores, online travel agents, hotel tent cards, and bottle caps for a few years, and their presence is only growing.

"Start earning big rewards with today's purchase!" reads the little card next to the counter at your local Macy's or Target. "Save 10% today."

Though in-store credit cards have high interest rates, low utility (you can only use it at one store), and are hardly ever a good idea, you should consider at least some corporate incentive programs, of which I'm an avid supporter. But be picky with which you use. Be sure to minimize the number of programs you participate in while maximizing your number of inputs into those programs.

If you're a disciplined spender, my recommendation is to get a rewards credit card that gives you rewards in a program in which you can otherwise enroll without the credit card. Furthermore, make sure the program is with a business that you patronize regularly (or could patronize regularly by shifting your loyalty). Good examples of these are the hotel and airline reward programs. Don't settle for the reward programs that only let you to purchase crap that you don't need from an overpriced catalog (like American Express). A good program will give you rewards that you will actually need and use -- something that is actually worth something to you.


A word of caution: Choosing a rewards credit card is only a good option if you can control your spending, as they tend to come along with a high interest rate. If you carry a balance on these cards, the interest you pay will most likely outweigh the reward that you receive.

If you decide to get the card, spend your money like it's cash (a.k.a. don't spend more than you've got), but use the card for everything. That's right, everything. If you've got a relatively low credit line and your monthly spending pushes you toward the limit, check your balance online and pay it off before your statement comes (if you're reading this blog, I assume you know how to do online banking). This will prevent the credit bureaus from thinking that you're maxing out your card.

My credit card is provided by Bank of America and earns rewards in the Choice Privileges rewards system with Choice Hotels (Comfort Inn, Comfort Suites, Quality Inn, etc). This is by far the best standalone rewards program that I have found; especially during their promotions. Here's an example:

Choice Hotels' current promotion is "Stay three times, earn enough points for a $50 gas card!" The way it works is you earn 10 points for every dollar you spend at a Choice Hotel. Every time you make three separate stays (regardless of the number of days), they will bump up your point balance so that it is at least 16,000 points higher than it was from when you started the first stay (which is zero if you're a new member). 16,000 points are the points required to redeem a $50 gas card. 16,000 points are also enough for up to two free nights in a hotel (free nights start at 6,000 points for a modest place off the interstate, up to 30,000 points for an oceanview room in Hawaii).

I'm going on a road trip next week in the Pacific Northwest, and will be staying one night each in different cities in my itinerary. Night one, I stay at a Comfort Inn in Seattle and pay $100 for the room. 1,000 points. Night two, $80 for a Quality Inn in Salem, OR. 800 points. Night three, Comfort Suites in Crater Lake for $120. 1,200 points. My current balance for the three stays is 3,000 points, which alone puts me at a stay-six-nights-earn-one-night rate -- not too bad. But with the promotion, because I stayed three times, they'll bump my points to 16,000, which means I get 13,000 bonus points. So for three nights and $300 in spending, I have earned at least one, maybe two free nights.

And because I have the Choice Privileges credit card and used it to pay for the room, I get an additional five points per dollar. So now, my point balance will be 17,500. Don't forget that with every monthly statement you are given two points per dollar into the program. It isn't going to make you rich, but it will pay into the program in which you already have a balance and will be sure to utilize.

That was just an example, but take this into consideration: During a recent business trip where I traveled every week for a couple of months, I amassed over 180,000 points, which is enough to spend a full month at a hotel for free. I really am about to go to the Pacific Northwest next week, and you can bet that I'm not going to pay a penny for a hotel room.

Cash back can also be nice, but the rewards grow so slowly, it takes ages of spending to get a substantial amount of money. You'll find that the less utility that a reward has, the higher percentage you receive with everyday purchases. For example, cash back has the highest utility, as it can be spent anywhere, but the slowest growth. A cash-back card might give you .5% back on purchases. On the other hand, a hotel rewards card has lower utility (points may only be redeemed for free hotel rooms) but will allocate points faster (equivalent of 2% cash on everyday purchases). I tend to opt for the higher reward-to-spending ratio, especially if the reward is something that I am almost guaranteed to use...like hotel rooms. With my current hotel rewards card, for example, for every $10,000 I put on the card for everyday purchases (which is about five to six months of spending for me), I earn enough points for about $200 worth of stays in the hotel chain. I travel from time to time, and it's always nice to be able to redeem those points when I would have otherwise paid for the room with cash.

Another trick is to sign up for rewards that allow double-dipping in other ways. Credit cards are one, but Upromise is another.

Upromise is great because it partners with all sorts of merchants ( like Choice Hotels), and gives you a percentage back (to be transferred to a 529 college plan) on things that you buy online from partner retailers and even in partner stores and restaurants. In addition to the percentage (from 1-10%, depending on the retailer), you earn points by paying with your hotel credit card. So going back to my credit card example, in addition to the 180,000 points I earned for my everyday spending and staying loyal to a hotel, I earned $240 in free money from Upromise for almost no extra effort and no shifted loyalty.

So many companies are striving to obtain our loyalty with free rewards, be they points or dollars and cents. I say, if the system is free and has tangible, useful rewards, why not do it? My coworkers laugh at me when I hand the cashier my buy-8-and-the-ninth-is-free coffee card in the cafeteria, but every other week when I enjoy that free cup of joe, I smile and think, "money's money!"