What Are Loyalty Programs?

Loyalty programs are designed by companies to reward loyal customers and entice new customers to use their services or buy their products. Airlines and credit card companies are the top designers of loyalty programs.

Airline loyalty programs

Airline loyalty programs reward customers with air miles, which are then redeemed for free airline tickets, flight upgrades and merchandise through airline partners. Most airline loyalties offer a bonus upon sign-up, then customers earn air miles with each flight they take. Some airlines offer reward miles for every ticket purchased by the customer, even if the ticket is for a friend, but usually airlines require customers to both purchase the ticket and take the flight to qualify for reward miles. Many airlines now offer reward mile redemption without blackout dates, meaning the customer can redeem reward miles for travel at any time.

Credit card Loyalty programs

Credit card companies have more flexibility than airlines in offering rewards. Flight miles are a popular reward for credit card companies, but they also offer points for cash back, gift cards for favorite retailers, hotel stays and a variety of merchandise rewards. Credit card holders earn loyalty points by making purchases and paying bills with the credit card. These points are then converted into airline miles, cash back or are used to purchase rewards. Customers who qualify for premium credit cards with high limits are eligible for loyalty programs with higher rewards.

Loyalty programs are now extremely competitive as companies attempt to offer more attractive rewards than their competitors. Consumers can weigh the benefits of different loyalty reward programs, and choose the programs that are the most lucrative.