Guide 51 · Earn and redemption
Points devaluation: when it happens and how to do it fairly
A devaluation is any change that makes points buy less: higher reward prices, lower earn rates, shorter expiry or fewer rewards. Do it only when the program's cost genuinely outgrows the margin that funds it, and first try changes that apply to future earning only. Protect balances members already hold where you can, give clear notice with the old rule, the new rule and the reason, and avoid repeated cuts.
Sooner or later most points programs face pressure to give less. Rewards cost more to supply, members redeem more than planned or the earn rate turns out to be too generous. A points devaluation can fix the numbers, but it also changes the deal members thought they had, and they remember. This guide covers what counts as a devaluation, when one is justified and how to carry it out so the program keeps its members’ trust.
What counts
What counts as a devaluation?
Any change that makes points, or the spending that earns them, worth less to members:
| Type of change | Example | Who feels it most |
|---|---|---|
| Higher reward prices | A reward moves from 10,000 to 12,500 points | Members saving for that reward |
| Lower earn rate | 10 points per dollar becomes 8 | Everyone who buys regularly |
| Shorter expiry | An inactivity window drops from 24 to 12 months | Occasional buyers |
| Fewer or worse rewards | The best-value reward is removed | Members who planned around it |
| New restrictions | Blackout dates, caps or minimums appear | Members who redeem at popular times |
| Move to dynamic pricing | Fixed reward prices start to follow cash prices | Members who saved for a set goal |
| Worse transfer ratio | Points move to a partner at 4 to 3 instead of 1 to 1 | Members who transfer to partners |
Members treat all of these as the same thing: the program taking back value. Some changes are less visible than others, but members compare notes, and a change that looks small in a spreadsheet can look large on social media.
Why it happens
Why do programs devalue points?
Mostly because the program’s cost has grown faster than the margin that funds it. Rewards may cost more from suppliers or partners. Members may redeem more of their points than the program expected, so the points liability is larger than planned. Or the earn rate may have been set too generously at launch, and every year of growth makes the gap wider. Occasionally the trigger is outside the program: a partner changes its prices or a co-brand agreement is renegotiated.
When it is justified
When is a devaluation justified?
When the cost is genuinely unsustainable and cheaper fixes have failed. A practical test: estimate the cost of the outstanding balance using the rewards members actually choose, not the rarely used ones. Then estimate the margin those members will bring over the next year after the cost of their rewards. If the outstanding cost is a large multiple of that margin, and no reserve covers it, the program needs to act.
Before cutting value, try the changes members feel least:
- Lower the earn rate for future purchases, or on low-margin categories only.
- Add cheaper rewards or points plus cash so members redeem the rewards that cost you least.
- Cut costs in fulfillment, partners or technology.
- Tighten promotions and stacking before touching the base deal.
If the problem is a few rewards that cost far more than the rest, reprice those rewards rather than the whole catalog.
Protect balances
Should balances members already hold keep their value?
Where possible, yes. The fairest devaluation changes what future spending earns and leaves existing balances whole. A hypothetical example shows why this costs something: a program with 800 million points outstanding, where 10,000 points buy a $100 voucher, owes about $8 million in reward value. Raising the price to 12,500 points would cut that to $6.4 million. A future-only change gives up that $1.6 million reduction, which must be funded from margin. It is the price of keeping faith with members who saved under the old rules.
If you must change reward prices, soften the change. Let members redeem at the old prices until a set date, or let them lock in a reward at today’s price for a period. The main exception is a program that is closing, where there is no future earning left to adjust; there, a transparent, negotiated reduction can be better than redemptions failing. See how to end a loyalty program well.
Notice and terms
How much notice do members need?
Start with your terms. Program terms often reserve broad rights to change the rules. Starbucks, for example, states in its Rewards terms that it can change, modify or cancel the program at any time without notice. A reserved right is not the same as a good practice, though, and in some jurisdictions a broad right to change the rules does not override fairness rules or notice requirements for changes that significantly reduce value. Check the law in each market and read the guidance in how to write loyalty program terms and conditions.
In the US, regulators are watching. The CFPB received over 1,200 complaints involving credit card rewards in 2023, and consumers said issuers and merchants reduce the value of rewards already earned by raising the points needed for a redemption. In Circular 2024-07, the CFPB said operators of credit card rewards programs may commit unfair or deceptive practices when they devalue rewards consumers have already earned, even if they act consistently with the program terms. The circular is aimed at card rewards, but any program tied to a co-brand card, or that wants to avoid the same complaints, should treat earned balances with the same care.
In practice, give members enough time to redeem at the old prices if they want to: at least one normal earning and redemption cycle. Treat it as a material change notice, sent directly to members rather than posted quietly on a web page.
Communicate
How should you communicate the change?
Say what is changing, in plain words, with:
- The old rule and the new rule, side by side.
- The date the change takes effect.
- The reason, stated honestly.
- What members can do before the date, such as redeem at current prices.
- Anything that improves at the same time, if it is real.
Send it through at least two direct channels, such as email and the app. Brief service teams before the announcement and give them a short FAQ. Archive the previous terms so disputes can be settled against the rules that applied at the time.
Avoid repeats
Why do repeated devaluations do more harm?
One devaluation can be explained as a correction. A series of them teaches members that points lose value if they wait, so they redeem quickly, stop saving for larger rewards and give less weight to the program when choosing where to buy. Members who no longer trust the balance stop treating it as a reason to come back.
Before any change, model the likely loss of engagement alongside the cost savings, and track behavior after the change: active members, redemption patterns and share of spend for the same group of members. If engagement falls more than the savings justify, the devaluation cost more than it saved. Review earn rates and reward prices on a fixed schedule, so small adjustments replace large, surprising cuts.
More answers
Frequently asked questions
What is a points devaluation?
A change that reduces what members get for their points or their spending. Common forms are raising the points needed for a reward, lowering the earn rate, shortening expiry, removing popular rewards or adding restrictions such as blackout dates.
Why do loyalty programs devalue points?
Usually because the cost of the program has grown faster than the margin that pays for it: rewards cost more to supply, members redeem more than expected, or the earn rate was too generous from the start.
Is a devaluation legal?
Program terms usually reserve the right to change the rules, but how that right can be used varies by jurisdiction. In the US, the CFPB has said that devaluing credit card rewards consumers have already earned can be an unfair or deceptive practice even when the terms allow it. Take legal advice for each market before announcing a material change.
How much notice should members get?
Enough to redeem at the old prices if they want to. For a cut to reward prices, that often means at least one full earning cycle for a typical member. Check the notice period your own terms promise and any legal minimum where you operate.
Should points members already hold keep their value?
Where possible, yes. Changing the earn rate for future purchases or letting members lock in current reward prices for a period keeps faith with members who saved under the old rules. Cutting the value of existing balances does the most damage to trust.
Can a program recover trust after a devaluation?
It can, if the change is explained, happens once rather than repeatedly and is followed by visible improvements elsewhere. Repeated cuts teach members to spend points fast and to treat future promises as uncertain.