Should I Save My Points for a Bigger Reward or Should I Cash Out Now?

May 5, 2010 · 0 comments

As a member of many points-based rewards programs, past and present, I’ve also been faced with this dilemma: should I cash out my points now for a more immediate reward, or should I save them up for a bigger reward which might yield a better point value?
My good friend Ginger over at AttentionTargetShoppers.com did a great post about this yesterday, advising her readers to ride the wave as long as you can, but when you see the shoreline approaching, get the heck off the board.

Signs that the ride may be ending?

- Fewer points are available each day
- Drastically MORE points are available each day
- Point values are changed
- Longer wait times for redemptions
- Fewer redemption options are available
- Slower, or no, customer service
- Management disappears…or reappears with a slew of excuses
- Member accounts closed for no/little reason
- The program’s refer-a-friend or affiliate program closes
Sometimes, there are no signs. You just wake up one day and POOF! Your favorite rewards program is gone, and all of your points/cash with it.
If you’re accumulating a large balance of cash or points, whether it’s to get a better value for your points (generally, a $100 gift card costs fewer points than four $25 ones) or to get one big check or gift card in time for a vacation or holiday, let me tell you now: This is a very bad idea.
You are betting against a couple of major risks when you do this:
1. You’re betting that the rewards program will stay in business and that it will honor its debt.
Rewards programs come and go — this I know from watching the landscape for over a dozen years. Sometimes the warning signs I mentioned above will be there, but other times there’s no warning whatsoever.
And while you may think, “Hey, this rewards program has been here a long time, it’s not going anywhere!”, “Everybody’s talking about this program and how many times they’ve been paid by it!”, or, “This rewards program has a big name behind it — I’m sure it’s stable!”, you’re making an assumption that’s been proven wrong many times over the years.
ClubMom’s rewards program? Dead. Parade Magazine’s rewards program? Dead. Publishers Clearinghouse’s PCH Points? Dead. BountyZoo, a US-based program founded by the owners of a popular UK-based program? Dead. Milesource, Blink, CyberGold, Beenz, Milespree… I could go on for days. Programs that had big backers, or a strong history, all gone.
You don’t have to look far to see people still licking their wounds from the closures of Netwinner, Wellness360, and Boomertowne, programs that had great potential but were doomed to fail because of poor management, fraud, and the economic downturn.

Do you remember the old saying, “A bird in the hand is worth two in the bush?” That saying was made for rewards programs. If your favorite program shuts its doors tomorrow, will it be keeping $100 of your money, or $10? Which would you prefer?

2. When you hold a large point balance, you’re betting that the rewards program won’t increase the price (in points) of the redemption you’re trying to reach.

Once upon a time, 1,000 MyPoints = a $10 gift card. It was simple and straightforward and fairly easy for people to do the math to see what their points were worth. Problem was, it wasn’t profitable enough for MyPoints. Their solution was to up the cost. They’ve done it several times over the years, to the point where now a $10 gift card costs between 1,500 and 1,650 points (depending on which GC you choose). That’s 50% inflation over the length of time I’ve been using the program.
As I mentioned before, rewards programs are usually set up so that you have an incentive to hold out for a bigger reward: it costs fewer points to buy one $100 GC than four $25 ones. But what happens if the rewards program increases the cost of the $100 redemption while you’re trying to attain it? You may have done better to cash out at the $25 level.
It’s not an unusual occurrence, it DOES happen, and you DO need to keep this in mind if you’re hoarding points. Even if the rewards program is still around when you finally hit your goal, there’s no guarantee that they won’t increase the number of points needed to hit that goal while you’re waiting.
So, when you hoard points or cash in a rewards program, those are the two risks you’re taking (that the program won’t close down, and that the program won’t increase the cost for your intended reward before you attain it).

What happens when a rewards program closes?
If you’re new to this and you haven’t lived through it before, here’s what to expect:
1. The rewards program may or may not honor outstanding redemptions.
2. The program may or may not give you a window of time to cash out your balance that you hadn’t yet redeemed.
3. The program may disappear without any notice or explanation to members, leaving you wondering if they’re down temporarily or permanently.
4. You will have NO RECOURSE WHATSOEVER to recover outstanding earnings that were unpaid.
You can complain to the BBB, to the Attorney General, Action News, Sixty Minutes, your Senator, your lawyer, your momma, and the deity of your choice, but that money is GONE. Rewards programs put wording in place within their terms of service that let them off the hook should they decide to close up shop, or should they decide to stay in business and just not pay people (ahem, NetWinner). You participate in a rewards program at your own risk. The question is, how much risk are you willing to assume?
A bird in the hand…
Cash out as often as you can, people. And don’t invest more time in ANY rewards program than you’re willing to lose without pay, because what seems like a sure thing right now can be gone tomorrow.

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