Loyalty glossary · 1. Program mechanics and currency (40)
Points Bank
Points Bank is the central ledger where a loyalty programme records a member's accrued points from all earning sources, typically including co-brand card spend. It is not a wallet owned by the member but a liability the programme must eventually settle through redemption or release through breakage.
A points bank is not a member benefit. It is the operator's liability ledger, a record of every point the programme owes. When accrual lands from a co-brand card transaction, it increases the bank. When redemption happens, it decreases the bank. When points expire or are forfeited, breakage shrinks the bank without any member action.
The term bank is chosen deliberately. It suggests safety, storage, and ownership. None of those apply. The member holds a claim against the programme, not a deposit. The programme can change the value of that claim through devaluation, expiry, or redemption availability. The balance on screen is a promise, not an asset.
Operators encourage members to bank points because a large outstanding balance is cheaper than immediate redemption. It defers cash outflow and increases the pool eligible for breakage accounting. But a points bank that grows faster than redemptions signals that the programme is failing to deliver value. It is a warning sign, not a sign of loyalty.
Suppose a member has 60,000 points in a points bank, and the programme values each point at 0.8 cents on redemption. The bank represents 480 dollars of potential liability. If breakage runs at 25 percent, the operator will eventually write off 120 dollars without providing any benefit to the member. That is the arithmetic of a banked balance.
A well-run programme treats the points bank as a working balance, not a storage facility. It sets expiry or activity requirements to keep the bank circulating. It links accrual to redemption, either through transfer partners or direct rewards, so the bank is a pipeline rather than a reservoir. A programme that lets points sit untouched for years is optimising for breakage, not for loyalty.
The member should treat a points bank with suspicion. It is not a savings account, and it pays no interest. The only entity that reliably profits from a large, inactive points bank is the operator that releases breakage into revenue. Redeem early, redeem often, or watch the value erode.