Loyalty glossary · 1. Program mechanics and currency (40)
Points Gifting
Points gifting is the transfer of loyalty points or miles from one member's account to another, usually for a fee. It turns a personal reward balance into a transferable asset and shifts redemption liability to the recipient without fresh earning.
Points gifting is not a reward for loyalty, it is a transfer service with a price. The operator charges a fee to move points between accounts, and that fee is the only reason the feature exists. It converts an already issued liability into a new revenue line without requiring any fresh earning from the recipient.
The mechanics punish the giver twice. First, the transfer fee is usually set at or above the redemption value of the points, so the giver pays more than the recipient can ever receive. Second, the recipient often faces the same redemption restrictions as the original earner, including expiry and minimum thresholds. The result is a transfer that looks generous but leaks value at both ends.
Work the example that exposes the loss. A member sends 10,000 points to a relative and pays the standard fee of 1 cent per point, so the transfer costs 100 dollars. If those points redeem at 0.8 cents each, the recipient can extract 80 dollars of value from that transfer. The difference of 20 dollars is the operator's margin on a transaction that was marketed as a favour. No accrual or co-brand card activity is required, which means the operator earns fee revenue without issuing any new credit.
Gifting also distorts breakage. When points sit in an account they are a liability that may never be redeemed, which is breakage. A transfer forces the operator to recognise the liability in a different account, but it does not remove it. However, the fee reduces the effective cost of that liability. Programmes that promote gifting are doing so because the fee revenue is more certain than redemption demand.
The honest comparison is with buying points outright or simply paying cash. Most programmes sell points at a similar or lower rate than the gifting fee, and a co-brand card earns points without a transfer charge. Gifting only makes sense when the recipient needs a small top-up to reach a redemption threshold and the fee is trivial. For any larger amount, the arithmetic says the giver would be better off gifting cash.
Points gifting is a trap dressed as generosity. It is a fee for nothing except a database update. Treat it as a last resort, not a feature.