Cards speed up redemptions with real-time rewards

Traditionally, redeeming your credit card rewards looked something like this: Earn a bunch of points, log in to your issuer’s website, decide how you want to redeem those points (Statement credit? Flight? Speakers?) and then wait to receive that reward.Real time rewards app

Lately, however, rewards programs are speeding things up and offering a rapidly expanding universe of real-time redemption options. Depending on the program, you might be able to redeem right at the register at certain retailers or even at the ATM. Chase recently launched an app (pictured to the right) that lets you use point to instantly generate an e-gift certificate with a bar code that you can present at the register at retail and dining partners. During the 2015 holiday season, United Airlines created a MileagePlus “pop-up store” in Newark Liberty International Airport, where program members could instantly redeem points for ear plugs, headphones and other travel accessories. Plus, the ability to cash in points at checkout with online retailers has been around for a couple years. (Skip ahead to see more examples in our table below).

We asked Jeff Berry, research director at loyalty-marketing research firm COLLOQUY what’s driving this real-time rewards trend and whether it’s smart for consumers to take advantage of these new options.

Why are rewards going real-time?

There are a couple reasons, Berry says. First and foremost, we as consumers want it NOW. We live in a world of Amazon Prime because we don’t want to wait more than a few days for something that we ordered online because we didn’t want to drive to the store.

“Everything today is real-time or as near to real-time as possible,” Berry says.

Another reason: Researchers have crunched the numbers, and real-time rewards mean more money for companies running loyalty programs. COLLOQUY research has found, for example, that after customers redeem rewards, their level of engagement with the program increases by 25 to 33 percent compared to their level of engagement before redemption. In other words, if Chase gives the consumer a small high from redeeming for a coffee at Starbucks (one of the businesses that partners with the Chase Freedom’s on-the-go redemption app), that customer is more likely to use the Chase Freedom for future purchases.

That gives issuers operating loyalty programs a huge incentive to shorten the gaps between redemptions.

“The ultimate benefit for the company is that the consumer will consolidate their spending with that company,” Berry says. “So they want the consumer to experience that gratification faster than has been traditionally allowed. It could take you years to earn a free flight.”

We can already hear the arguments from rewards maximizers:

Won’t cash back via statement credits get you the same value (if not more)?

Isn’t cash back more flexible because you can use on anything, not just at the shoe store your card partners with?

Technically, the answer to both those questions is “yes.” In fact, cash back was one of the first adaptations on the evolutionary path toward more real-time rewards, Berry says. But think of it from a business perspective: Cash-back statement credits often just collect in your rewards account. You might also have your account set up to get cash-back credits automatically deposited into a banking account.

“You almost come to expect it,” Berry says. “It becomes a ho-hum benefit.”

Because you’re not consciously aware of being rewarded, Berry says, you don’t get that gratification jolt from redeeming — and the company doesn’t get the uptick in engagement.

“Redemption is an interesting part of the consumer journey because they need to do it, but also recognize that it’s happened, for companies to get the full benefit,” Berry says.

Should you take advantage of real-time redemption?

Do you cash out in real time or hold out for a big reward? In general, Berry says redeeming for a big reward (such as a flight) generally gets you a greater per-point value (more on calculating that value here). However, your best strategy will depend on your needs. Here are some guidelines for making that decision:

  • Do the math: Berry calls this calculating the dividends of a rewards program.

    “That’s how many dollars you’re spending within the program and what are you getting in return,” he says. “A smart consumer would be doing the math on that.”

    As a starting point, look at all your program’s redemption options and how many points they require. Into that, divide the cash value of the item (the flight, the real-time discount, the blender, etc). This will yield the monetary value of each point and allow you to compare options apples to apples in advance — and help you decide at the register or gas pump if redeeming in real time is a good deal.

    At some point (perhaps at the end of the first year), take stock of what you’ve redeemed, the value you got and whether the program has changed its terms for better or worse.

  • Figure out what kind of consumer you are: “We typically see customers fall into two buckets,” Berry says. “Aspiration and Value.”

    If you’d get the most satisfaction saving up points for a big family trip, you’re in the Aspiration bucket.

    If you’d rather get in-the-moment discounts on a cart full of groceries or at the pump, you’re in the Value bucket – and real-time rewards could be right up your alley.

    “People have an inherent dislike of paying for fuel,” Berry says, “So maybe getting 10 cents off a gallon of gas feels better than waiting for something long term.”

So, when it comes to real-time rewards, do the math – but know that your best move might run counter to what the numbers say is best.

“There certainly is a personal aspect of what’s most meaningful to you in that calculation,” Berry says. “Maybe the dollars off a tank of gas isn’t as good a value as the flight, but you value it more.”

Reward programs with real-time redemption options
ProgramReal-time options
Chase Ultimate RewardsChase Freedom Mobile app (generate instant e-gift card to use at partner retailers)

Use points instantly with online partners (including Amazon) at check-out
United MileagePlusOffered pop-up airport store during Dec. 2015
Wells Fargo Rewards ProgramRedeem rewards toward cash withdrawal at ATM (if your card is part of the Wells Fargo Rewards program)
American Express Membership Rewards (American Express is a CreditCardForum advertising partner)Redeem instantly at checkout with online partners (including and Ticketmaster)
Plenti Program (and Plenti American Express card)Redeem Plenti points instantly at the register at retail partners (includes Exxon, Macy's, Mobile and Rite Aid)
Citi ThankYouPay with points at online partner retailers (including Amazon and Live nation). More options coming soon, as Citi is partnering with the app Wonder, for real-time redemption with other partners.
The responses below are not provided or commissioned by the bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by the bank advertiser. It is not the bank advertiser's responsibility to ensure all posts and/or questions are answered.

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