Many consumers accumulate points and other rewards in loyalty programs to splurge for some future luxury. At this time, that accumulated value, as much as $18 billion, could be a source of short-term relief and help some Canadians meet their basic needs.

Many of Canada’s most popular loyalty programs entitle consumers to redeem rewards for cash, pay for groceries or use gift cards for regular purchases. That feature could be very helpful for consumers struggling for necessities. Consumers who instead prefer rewards based on movies or travel rewards may find it more challenging to turn those points into cash or equivalents.

Special movie nights in sophisticated theatres may be on hold, but Scene points can turn into gift cards for national restaurant chains. Travel-based rewards programs are more complex as a rule. Consumers who continue to use payment cards to grow their travel rewards are essentially accepting the risks that airlines will keep flying, and their points will eventually be honoured at some point in the future. Perhaps travel to dream destinations will return, but it’s also not hard to imagine that travel will dramatically change in the future.

Consumers generally have a poor understanding of how their loyalty programs work, and are poorly equipped to make complicated choices about when to redeem points, and whether to switch between programs. A recent Consumers Council of Canada research report found that consumers have virtually no understanding of how quickly rewards are earned, how loyalty programs are funded and view the points they accumulate in loyalty programs as “something for nothing”, a reward earned for spending using methods of payment they would have chosen without reward.

Loyalty programs have complicated rules. It can be difficult to determine an optimal redemption choice. Benefit accumulation is not always straightforward. A 10,000 point balance might provide more than 10 times the rewards of a 1,000 point balance. Travel-based rewards programs are typically structured so that choosing “non-travel” rewards provide less overall value. And value can become “trapped”. Air Miles, for example, allows collectors to choose between Dream Miles (travel rewards) or Cash miles (non-travel). Consumers can change their preferences between the two, but cannot transfer Dream Miles balances to Cash Miles.

Continuing to hold points also exposes consumers to inflation-like risks – unused points don’t appreciate in value – but also to potential devaluations by providers. Plan providers have been extremely reluctant to devalue points in the past because of consumer backlash, but it’s always a future possibility.