The Rewards of Being a Free Agent Customer 

            Think of this as a progress report. Three years ago, while we were all locked down during Covid-19, I wrote about discovering the limitations of customer loyalty programs.

            Today, I’m happy to report, the Burns family has made great progress in its detox from same. We’re on the path to Cash-Back Living, the lifestyle of immediate rewards and greater privacy.

            It hasn’t been easy. As far as I know, there is no 12-step program for customer loyalty addicts, even though there appears to be a program and support group for just about everything else. If you’re going to detox off customer loyalty programs, there’s only one way to do it.

            Cold turkey.

            Expect shivers of doubt and fevers of uncertainty. Be prepared for people at checkout counters to give you suspicious looks when you decline to offer your email address or accept the discounted first purchase for signing up.

            But we’ve done it.

            We’re looking forward to feeling the long-term benefits:

—fewer emails from familiar stores

—fewer reminders that our precious $1.84 reward from here or there is about to disappear because we haven’t bought anything in a year

— a less harried life and

— no concerns that our points at this or that business will be devalued, unusable or lost in a corporate bankruptcy.

            That moment of bliss hasn’t happened. Yet.

Counting Cash

            But while we’re waiting, let me brag about the cash benefits.

            So far, our detox has resulted in over $400 no longer being spent on credit card annual fees. In addition, our “cash back” rewards exceeded $1,300 in the last 12 months.

            All with no heavy lifting.

Not for Road Warriors

            Some will say this is small beer. True members of the Road Warrior Class will scoff. And rightly so. One upgrade to a first-class airline seat can easily be worth a multiple of our annual cash benefits. Ditto, the flight that gets you free companion flights on Southwest. Some have amassed so many airline credits that they need advice for how to pass their miles on to their heirs.

            But it’s not that way for most people.

It’s like having an extra $40,000 in savings

            To put the cash benefit in perspective, we’ve enjoyed a change of more than $1,700 in spendable after-tax income. With money market mutual funds now yielding near 5 percent, you’d need about $34,000 in a fund to earn that much. But it would be pre-tax, so you’d actually need $40,000 invested if you were in the 15 percent tax bracket, or $43,600 in the 22 percent tax bracket.

            Last time I looked, that’s a ton more than most people can, or do, put in their 401(k) plans in a year.

            Don’t get me wrong. I’m still a loyal Southwest Airlines customer. We still buy virtually all of our food at HEB, the cornucopia of Texas. (HEB, by the way, recently introduced its own cash-back card. I think it ranks up there with the Amazon Prime card, the Apple card and the Chase Freedom Unlimited card. You can explore cash-back cards for yourself at NerdWallet.)

            But that’s pretty much where it ends.

Great for them, not so great for you and me

            My disenchantment with loyalty programs may have begun at a Starbucks. Standing in line, wondering if I had a free drink in the near future, it occurred to me that encouraging my addiction to caffeine and sugar wasn’t a good idea. It was good for Starbucks. But not so good for me.

            Beyond that, if you’ll excuse me for being snotty, there’s something kind of creepy about the faux status of being a frequent Starbucks customer.

            After that, I started to notice that every credit card used at a store seemed to be an excuse to capture my phone number and email address. Even without becoming a member of a loyalty program, just being a registered customer would start endless emails, all breathlessly announcing amazing sales of miraculous products.

            Week after week after week.

            So, yes, a loyalty program can be good for business.  They are an immense business in themselves. According to a study by Fortune Business Insights, spending on such programs was expected to grow from $5.29 billion in 2022 to $28.65 billion in 2030.

            But are they good for you and me?

            I doubt it.

            We voluntarily give up our privacy for what? Try this. McDonald’s has a rewards program and an app to help track the rewards. If you download the app and spend $1 a McDonald’s, they’ll give you a large fries.

            And that’s just for starters.

Related columns:

Scott Burns, “Coming Soon: New Money Habits,” 07/11/2020: https://scottburns.com/coming-soon-new-money-habits/

Sources and References:

Fortune Business Insights, “Loyalty” Research Report: https://www.fortunebusinessinsights.com/search/?search=loyalty

MyMcDonald’s Rewards: https://www.mcdonalds.com/us/en-us/mymcdonalds.html

Richard Kerr, “What happens to your points and miles after you die?,” 04/02/2022: https://thepointsguy.com/guide/points-and-miles-after-you-die/

Nerd Wallet, “14 Best Cash Back Credit Cards of August 2023,” 08/03/2023: https://www.nerdwallet.com/best/credit-cards/cash-back

This information is distributed for education purposes, and it is not to be construed as an offer, solicitation, recommendation, or endorsement of any particular security, product, or service.

Photo: Scott Burns, Behind the scenes at a Circuit of the Americas track day, 2022

(c) Scott Burns, 2023