Guide 38 · Earn and redemption
How to set a minimum redemption threshold
Set the minimum at the smallest reward that is genuinely worth delivering, not higher. For digital rewards and account credits, that can be a very low balance, because each redemption costs little to fulfill. For physical rewards, the minimum should cover the real cost of fulfillment. A threshold set higher than that does not reduce what you owe members; it only delays it and frustrates them.
A minimum redemption threshold is the smallest points balance a member needs before they can redeem anything. The short answer to how to set it: at the smallest reward that is genuinely worth delivering, and no higher. It looks like a small technical rule, but to members it decides when their points start to mean something. Set it too high and members carry balances they cannot use; set it with care and it simply keeps each redemption worth the effort of delivering. This guide explains why programs set a loyalty points minimum redemption, what it costs, how to size it by reward type, how to change it and how the related question of rounding fits in.
What it is
What is a minimum redemption threshold?
It is the smallest balance a member needs before they can redeem anything. A minimum redemption usually equals the price of the cheapest reward, although some programs set it separately. Sephora Beauty Insider members need at least 500 points to redeem $10 off, and the purchase must be $10 or more. Starbucks Rewards in the US starts lower, at 25 Stars for $1 off a drink add-on. Tesco converts Clubcard points into vouchers, with 150 points giving £1.50. Each design answers the same question differently: how small a reward is still worth delivering?
Why programs use one
Why do programs set one?
There are three honest reasons and one weak one.
- Fulfillment cost. Every redemption has a cost: a voucher code, a payment fee, staff time at the till, or shipping for a physical item. Below some size, delivering the reward costs more than it is worth.
- A reward that feels like a reward. Very small rewards can feel trivial and add noise at checkout.
- Simplicity. A few clear reward levels are easier to explain than a sliding scale.
- Fraud control. A floor makes it less attractive to farm many small accounts for tiny rewards, and it gives fraud checks a moment to run before value leaves the program. If this is your main reason, pair it with the controls in the loyalty fraud guide rather than raising the floor for everyone.
The weak reason is breakage: hoping that members never reach the line. Points below the threshold still count as a liability until they lapse, so a higher threshold does not reduce what you owe. It delays it, and it turns some active members into frustrated ones.
What it costs
What does a threshold cost?
Mostly trust and service time. A hypothetical example: a program sets the minimum at 1,000 points, members earn 1 point per dollar and each point is worth half a cent. A member holding 700 points has $3.50 of value they cannot use until they spend another $300. If that member calls customer service to ask why, and the call costs the program more than $3.50 to handle, the rule has cost more than releasing the value would have. And the $3.50 is still on the books.
The accounting does not change either. Until points are redeemed or lapse, the program usually carries them as a liability, whether or not the member can use them yet. A threshold can shift when redemptions happen, and it can raise the share of points that are never used, but any estimate built on members failing to reach a reward should be conservative and reviewed often.
Thresholds also hit the members you most want to keep: new members, who have small balances by definition. If their first months end with points they cannot use, many stop paying attention. Track how long new members take to reach their first redemption; it is one of the clearest early signs of whether the threshold is right.
Watch, too, for different minimums on different redemption options. If cash back or statement credit needs a much higher balance than a voucher or a catalog item, members with small balances are pushed toward whichever option has the lowest floor, even when it gives them less value per point. Members and consumer writers notice these hidden limits. Where floors must differ, publish them side by side and keep the value per point close across options.
Size it by reward
How do you size the threshold by reward type?
Set it separately for each kind of reward, from the real cost of delivering one redemption.
| Reward type | Main cost per redemption | Where to set the minimum |
|---|---|---|
| Account credit or discount at checkout | Very low, mostly system cost | As low as the smallest discount that is worth showing |
| Digital voucher or gift card | Face value plus any issuing or payment fee | The smallest denomination your supplier offers |
| Free product in store | The product’s cost and staff time | The cheapest item you are willing to give away |
| Physical reward shipped | Item, packing, postage and handling | High enough that the points cover these costs |
| Partner reward | The partner’s charge per redemption | At or above the partner’s minimum fee |
Then check two things. First, can a member with the lowest qualifying balance redeem online without help? If not, fix that before anything else. Second, how long does a typical new member take to reach the minimum? If it is longer than a few months of normal buying, lower it, add a cheaper reward or offer points plus cash so small balances can be used.
A ladder of reward levels often works better than one high minimum. A low first level gets new members redeeming early, and higher levels with better value give engaged members something to save for. Starbucks Rewards, for example, runs several levels between its 25-Star and 400-Star rewards. Each extra level adds a little complexity, so keep the ladder short enough to explain in one line on the app’s home screen.
Change it
How do you change an existing threshold?
Lowering a threshold is simple: announce it, update the app and the terms, and let members redeem straight away. Raising one is a material change, because it takes away a reward some members were saving toward. Before you raise it:
- Count the members who are within reach of the current minimum and estimate how many would fall short after the change.
- Give notice well before the change takes effect, with the reason stated plainly.
- Protect existing progress where you can, for example by letting members redeem at the old level until a set date.
- Update every place the minimum appears at once: app, receipts, emails, the till and the program terms.
Then compare first redemptions, service contacts and the share of active members before and after. If complaints rise and redemptions fall, the change has cost more trust than it saved.
Rounding
Should points round up or down?
Rounding is the other everyday rule that decides whether points feel fair. When a purchase earns a fraction of a point, someone keeps the remainder. A rounding rule that rounds down keeps it for the program; rounding up gives it to the member. The system work is the same either way.
Members notice. If the program promises 1 point per dollar and a $9.50 purchase earns 9 points, it looks like broken arithmetic rather than a policy. Rounding up costs a fraction of a point per transaction. To size it, take a month of transactions, add up the fractions you would give away by rounding up, multiply by your cost per point and divide by active members. If the cost per member is small, round up. The main exception is very low-margin, low-value transactions, where an extra point can cost more than the sale earns; there, round down or exclude those items, and say so in the terms.
Show progress
What should members see?
The rules only work if members can follow them. Show the balance, the next reward and the points still needed in the app, on receipts and in emails. Express the balance in money as well as points where you can, so members know what they hold. State the minimum, the rounding rule and any exceptions in your terms and conditions. And watch the redemption rate of new members: if it stays low after the first few months, the threshold, not the members, is usually the problem.
More answers
Frequently asked questions
What is a minimum redemption threshold?
It is the smallest balance a member needs before they can redeem anything. Below it, points cannot be used, even though they still count toward the balance and toward what the program owes.
What is a good minimum redemption threshold?
There is no single number. Start from the cheapest reward you are willing to deliver and its real cost per redemption, then check how long a typical new member takes to reach it. If that is more than a few months of normal buying, the threshold is probably too high.
Does a high threshold increase breakage?
It can, because some members never reach it. But points below the threshold are still a liability until they lapse, and relying on members failing to reach a reward is a weak basis for a program. Count it conservatively, if at all.
Should the threshold differ by reward type?
Yes. Digital vouchers and account credits cost little to deliver, so they can start low. Physical rewards carry packing, shipping and handling costs, so their minimum should be high enough to cover them.
Should points round up or down?
Rounding up is usually the better member experience, because it matches the published earn rate in members' heads. Round down only where the extra fraction would cost more than the margin on very small transactions, and say so in the terms.
Can points plus cash replace a threshold?
It can soften one. Letting members combine a small balance with cash means they can use points before reaching a full reward; JetBlue's Cash + Points, for example, starts at 500 TrueBlue points. It needs a fixed value per point and clear refund rules.
How do you change an existing threshold?
Lowering it is easy and members welcome it. Raising it is a material change: give notice, explain the reason and consider letting members redeem at the old level until a set date.