Guide 45 · Legal and compliance

How to write loyalty program terms and conditions

Write loyalty terms that a new member can understand without a lawyer: how points are earned and redeemed, what they are worth, when they expire, what does not count, how data is used and how the program can change. Put a plain summary of the key numbers next to the join button, keep the full terms one click away, date every version and have counsel review them before launch.

Published Oct 27, 2026Updated Oct 27, 20267 min readBy Loyalty Register Editorial Team

Loyalty program terms and conditions are the contract behind every point a member earns. Good terms state every earning, redemption, expiry and change rule as a specific number, put a plain summary next to the join button, and are dated and reviewed every year. This guide covers what the terms should say, what US rules require you to disclose, how to word the clauses that cause most disputes, and gives you an outline to copy. It is general guidance; have counsel review your terms before launch.

What to cover

What should loyalty program terms cover?

Section	What to state	Example of a clear rule
Operator and eligibility	Who runs the program; who can join	“Open to US residents aged 18 or over.”
Earning	Every way to earn, with a rate for each	“1 point per $1 spent, before tax and delivery.”
Exclusions	What does not earn	“Gift card purchases do not earn points.”
Redemption	What points buy and any minimum	“100 points = $1 off; minimum 500 points.”
Value	Whether points have cash value	“Points have no cash value and cannot be exchanged for money.”
Expiry	When points or rewards lapse	“Points expire after 12 months with no purchase or redemption.”
Returns and fraud	How points are reversed or removed	“Points earned on returned items are deducted.”
Data use	What is collected and how it is used	A short summary with a link to the privacy notice
Changes and closure	How the program can change or end, and how members are told	“We will email members 30 days before any change that reduces value.”
Account closure	How members leave and what happens to points	“Points are forfeited when you close your account.”

The examples are illustrations, not recommended values.

Make them readable

How do you make the terms readable?

Write for a new member, not a judge. Use short sentences, numbers instead of words like “periodically” and the same names for points and tiers that appear in the app. Define any term you must use, such as “qualifying purchase”, the first time it appears.

Then put a summary of the key numbers next to the join button: earn rate, what a point is worth, the first reward, the expiry rule and any tier thresholds. Keep the full terms one click away as the source of truth.

Test it. Ask a few people who have never seen the program to read the summary once, then ask what they earn per dollar, what a reward costs and when points expire. If they cannot answer, rewrite it.

What to disclose

What must you disclose before members join?

The material terms: how points are earned and redeemed, what they are worth, expiry and inactivity rules, any fees, eligibility limits, how personal data is used and shared, and your right to change or end the program. Members should see these before they agree, not after.

Privacy rules add specific requirements. Under the California Consumer Privacy Act, consumers can ask what personal information a business collects, request its deletion (with some exceptions) and opt out of its sale or sharing. Discounts and other benefits offered in exchange for personal information must be reasonably related to the value of that information. Say plainly what data the program collects and what members get in return.

Colorado is more specific. Its Privacy Act rules require a business with a loyalty program to disclose at registration the categories of personal data it sells or uses for targeted advertising, the categories of third parties that receive data, and a list of program partners with the benefits each provides. The program terms must also link to the privacy notice. Our guide to loyalty program laws covers other regions.

If the program issues reward cards that work like gift cards, federal rules apply too. Under Regulation E, a card issued for loyalty, award or promotional purposes must state that on its front, show the expiration date of the funds and disclose fees and a toll-free number to qualify for its exclusion from the federal gift card rules.

Expiry and changes

How should you write the expiry and change clauses?

Give expiry a number and a trigger. Sephora’s Beauty Insider terms, for example, say unredeemed points expire when a member has had no point activity, meaning a purchase or a redemption, for 12 months or more. A rule like that tells members exactly how to keep their points. State whether members will be reminded before points lapse. Our guide on points expiration covers how to choose the rule itself.

Change clauses need the same precision. Say how members will be told, how much notice they get before a change that reduces value, and from what date it applies. A material change notice with a window to redeem under the old rules is fairer and easier to defend. Clauses that let you remove value without notice may be challenged as unfair terms. Regulators also look at how a clause is used. In a December 2024 circular on credit card rewards, the CFPB said operators may act unfairly or deceptively when they devalue rewards members already earned or revoke rewards based on buried or vague conditions, even when they follow their own terms. See points devaluation for how to make a change fairly.

Protect the economics

How do terms protect the program’s economics?

Several clauses carry real financial weight:

No cash value. Points that cannot be exchanged for money support the position that they are a reward, not money owed. This matters for unclaimed property rules.
Earning exclusions. Gift cards, taxes, delivery and returned items are common exclusions. Name them; a promise of points on “all purchases” followed by exclusions creates disputes.
Promotions. Bonus events can run under their own terms. Sephora, for example, says specific bonus point offers carry separate terms and conditions.
Fraud and misuse. The right to suspend accounts and remove points obtained improperly, with a route for members to appeal.

Copy the outline

What does a loyalty program terms and conditions template look like?

Replace every bracket with your own rule.

About the program. [Company] runs [program name]. Membership is free and open to [residents of where] aged [age] or over.
Earning. You earn [number] points per $1 spent on [qualifying purchases]. These do not earn points: [exclusions].
Redemption. [Number] points can be redeemed for [reward]. The minimum redemption is [number] points.
Value. Points have no cash value and cannot be sold or transferred, except [any exception].
Expiry. Points expire after [number] months with no purchase or redemption. We will remind you [number] days before.
Returns and fraud. Points earned on returned items are deducted. We may suspend accounts used for [named misuse]; you can appeal by [route].
Your data. What we collect, why, who receives it, and a link to the privacy notice.
Changes. We will tell you [number] days before any change that reduces the value of your points, and when it takes effect.
Closing your account or ending the program. What happens to points and how long you have to redeem.
Contact. How to reach support and how disputes are handled.

The outline is a structure, not legal text. Have counsel adapt it to each market you operate in.

Keep them current

How do you keep the terms current?

Date every version and keep an archive, so you can show what a member agreed to at any point. Update the summary, the app, staff scripts and support macros at the same time as the terms, so nobody is working from old rules.

Review the terms before launch, whenever the rules change and at least once a year. Check them against what actually happens: if support routinely makes exceptions to a rule, either the rule or the practice needs to change.

Back to the seven questions

Frequently asked questions

What should loyalty program terms and conditions include?

Who runs the program, who can join, how points are earned and what does not earn them, how and for what points can be redeemed, expiry rules, fees if any, how returns and fraud are handled, how personal data is used, how the program can change or end, and how members can close their account.

How should an expiry rule be written?

As a specific rule with a number, not a possibility. 'Points expire after 12 months without a purchase or redemption' is clear; 'points may expire' is not. Say what counts as activity and whether members are warned before points expire.

Can a loyalty program change its terms?

Most terms reserve the right to change the program, but the clause is not a free pass. The CFPB has said rewards operators may act unfairly or deceptively when they devalue rewards members already earned, even if the terms allow it. Give notice before changes that reduce value, set an effective date and consider a window to redeem under the old rules.

Should loyalty terms say points have no cash value?

Most programs do, and it matters beyond clarity. A statement that points have no cash value and are redeemable only for program rewards supports the position that points are a loyalty reward rather than money owed, which affects how unclaimed property rules apply.

Is there a loyalty program terms and conditions template?

This guide includes a ten-part outline you can copy: operator and eligibility, earning, redemption, value, expiry, returns and fraud, data, changes, closure and contact. Fill in your own numbers, write each rule as precisely as the examples, and have counsel review it before launch.

How often should loyalty terms be reviewed?

Before launch, whenever the rules change and at least once a year. Keep a dated archive of every version so you can show what members agreed to at any point in time.

Sources

Checked 2026-10-26