Guide 24 · Earn and redemption
Should loyalty points expire?
Often yes, but on an inactivity trigger rather than a fixed date. An inactivity rule lets points lapse only after a member has gone a set period without earning or redeeming, so active members keep their balance while dormant balances stop adding to what the program owes. Whatever you choose, state it plainly in the terms, warn members before points lapse and check local law before launch.
Points expiry is one of the few program rules that takes something away from members, so it draws more complaints than almost any other. It is also one of the main tools a program has to control what it owes. The useful question is not whether points should expire at all, but what event makes them lapse, how long members get, and how they are warned. This guide covers each choice and what to check before you write the rule.
Why expire
Why do programs let points expire?
Mostly for financial reasons. Every point issued is a promise of a future reward, and many businesses record unredeemed points as a liability; Starbucks, for example, defers revenue for the Stars members earn and records a liability for them. Members who stop buying keep their balances, so without some form of points expiry the amount owed keeps growing even when the people holding it have gone.
A deadline can also prompt a member to come back and redeem, and expiry reminders often produce a burst of redemptions. That effect is real but usually a side effect. It helps to treat expiry as a finance decision first, made with the people who manage the points liability, and then design the reminders as the member-facing part.
Pick a trigger
Which expiry trigger should you use?
There are four common patterns:
| Trigger | How it works | Effect on active members | Main risk |
|---|---|---|---|
| Inactivity | The whole balance lapses after a set period with no earning or redemption | None, as long as they keep buying or redeeming | Needs an accurate last-activity date on every account |
| Rolling age | Each batch of points lapses a set time after it was earned | Can lose older points even while active | Members find it hard to track several dates |
| Fixed calendar date | Points lapse on one date, often at year end | Active members can lose points that crossed the date | Spikes in complaints and service contacts around the date |
| Status-based | Points do not expire while the member keeps a tier | Rewards the best members with no expiry | Lower tiers carry the full rule |
Real programs mix these. Sephora Beauty Insider points expire after 12 months or more without a purchase or redemption, a pure inactivity rule. Starbucks Green level Stars expire six months after the month they were earned, but a purchase, a redemption or a qualifying reload in the month before expiry extends them, and Stars do not expire while a member holds Gold or Reserve status.
For core points, an inactivity rule is usually the fairest, because it only touches members who have stopped engaging. Fixed dates work better for promotional bonus points, for example points from a seasonal campaign that lapse a set time after it ends. Do not combine a fixed date and an inactivity rule on one balance unless your system can track each batch of points separately.
Set the window
How long should the window be?
Base it on how often your customers buy. Take the typical gap between purchases for members who are still active, and set the window at least twice that, with extra room for seasonal buyers. A coffee chain and a furniture retailer need very different windows. For frequent categories, 12 to 24 months is a reasonable range to test; occasional categories usually need longer.
A hypothetical example shows how an inactivity clock works. A member earns 1,200 points in January, earns 300 more in March and redeems 500 in June. Under a 12-month inactivity rule, the June redemption resets the clock, so the remaining 1,000 points lapse the following June only if the member does nothing in between.
Do not make the window very short to cut the liability quickly. Members who are still learning the program lose points before they can use them, and the complaints and lost goodwill can cost more than the balances removed. Test the window against your dormancy data before you publish it. Look at how many members who went quiet for the proposed period later came back and bought again; if the share is high, the window is too short for your customers.
Define activity
What should count as activity?
Write the definition into the terms. Earning and redeeming should both count; treating a redemption as inactivity punishes members who use the program slowly. Whether logins, app opens or survey answers count is a policy choice. Counting them keeps more balances alive and makes the rule feel kinder, but it can keep points live for members who no longer buy. Whatever you choose, make sure your platform records the event with a reliable date, because that date decides every expiry.
Warn members
How should you warn members?
Send at least one reminder before points lapse, and ideally a second closer to the date. Each one should state the balance at risk, the expiry date and the simplest action that keeps the points: a purchase or a small redemption. Use direct channels, email or app messages, not only a change to a web page. Then:
- Show the next expiry date in the app and on statements, next to the balance.
- Offer easy ways to use a small balance, such as low-value rewards or points plus cash.
- Decide in advance whether service agents can reinstate expired points and on what terms.
- Track complaints and reinstatements after each expiry run, and adjust the window or notices if they rise.
Check first
What should you check before adding or changing expiry?
Check the law first. Rules on expiry, notice and the treatment of dormant balances vary by state and country, and some places restrict expiry or treat certain balances as unclaimed property; see whether unclaimed property laws apply to loyalty points. Then agree the accounting with your finance team, because expiry feeds directly into your breakage estimate.
If your points are funded by partners rather than carried on your own books, the financial case for expiry changes, and the partner contracts may already set the rules. For any new or shorter window, run the logic for a period without removing balances: flag the accounts that would lapse, send the notices and measure how many members return or complain. Never apply a new rule to existing balances without a full notice period first, and write the final wording into your terms and conditions.
More answers
Frequently asked questions
Why do loyalty programs let points expire?
Mainly to limit what the program owes. Every unredeemed point is a promise the business still carries, and balances held by members who have left would otherwise grow without limit. A deadline can also prompt members to redeem, but that effect is usually secondary.
What is the difference between inactivity and fixed-date expiry?
An inactivity rule removes a balance only after the member has done nothing for a set period, and any earn or redemption resets the clock. A fixed-date rule removes points on a set date or a set time after they were earned, whether or not the member is still active.
How long should the inactivity window be?
Long enough that a normal customer never hits it. A common approach is to set it at least twice as long as the typical gap between purchases, with a margin for seasonal buyers. For frequent categories, 12 to 24 months is a reasonable starting point to test; occasional categories need longer.
Do you have to warn members before points expire?
It is good practice everywhere and required in some places. Send a reminder before the date with the balance at risk and the action that keeps it alive, and repeat it closer to the deadline. Check the rules in each market where you operate.
Can a program add expiry to points members already hold?
Changing the rules for existing balances is the riskiest version, legally and for trust. If you add or shorten expiry, give a full notice period before the first points can lapse and make it easy for members to keep their balance by earning or redeeming.
Do points that expire become profit?
Expired points reduce the liability the program carries. How and when that reduction appears in the accounts depends on your accounting policy and your expected breakage, so agree the treatment with your finance team before changing expiry rules.