Loyalty but at what cost?
NINE in ten Australian adults are members of a loyalty scheme, and the chance to score a freebie can be very appealing. But consumers aren't the real winners of these schemes.
Loyalty schemes are everywhere in Australia. They're offered by airlines, banks, cinemas, hotels, restaurants and retailers. They're so popular that the average Aussie carries around four to six loyalty cards.
The sheer numbers are amazing. According to an investigation by consumer watchdog, the ACCC, Qantas Frequent Flyer has over 12 million members. Woolworths Rewards has almost 11 million members.
Despite their popularity, loyalty schemes can have serious drawbacks. They're often a lot more rewarding for big business than for you and me - though often in ways many of us never suspect.
Most people join a reward scheme to earn a few perks or special discounts. But behind the scenes, some schemes build up detailed profiles of members, and then sell these insights to other businesses. In fact, this on-selling of member data is becoming an increasing source of revenue for many scheme providers.
The scary part is, you don't always need to scan a loyalty card to reveal personal data. The ACCC notes that Qantas Frequent Flyer collects data about members when they use free wi-fi in the Qantas Lounge and on the aircraft.
Loyalty schemes can impact our spending in other ways.
A Canstar Blue survey found that almost 40% of Australians shop at one supermarket chain - and for more than half these shoppers, their loyalty is driven by the opportunity to rack up some rewards points.
When it comes to redeeming points however the experience isn't always so rewarding. It's an area where the ACCC receives plenty of complaints.
Common problems include points that expire, restricted opportunities to redeem points, and sudden changes to the rate at which points can be earned.
The ACCC has made some draft recommendations about how these downsides can be addressed. But until anything concrete happens, it is worth a think about whether your reward programs are offering real value.
Plenty of reward schemes charge an annual fee - making it even more likely you'll stick with the same provider to recover your money. But what the fee is really costing you is the incentive to shop around for a better deal - and in many cases, your personal privacy.
Paul Clitheroe is Chairman of InvestSMART, Chairman of the Australian Government Financial Literacy Board and chief commentator for Money Magazine.