Reward points : know it or not, you probably have little or no chance of cashing in.

Maroney on Money for September 21, 2002

Is your wallet bursting at the seams? If you answered “yes” there’s a good chance it isn’t wads of cash causing the problem but rather a growing collection of affinity cards. More commonly known as loyalty cards, these are the cards consumers carry to accumulate “points” that they intend to exchange for some kind of benefit somehow, somewhere, someday in the future.

With a seemingly endless number of “points” programs in existence, whether you know it or not, you probably have points all over the place with little or no chance of cashing in. Bearing this in mind, it was really no surprise this week when I stumbled upon a website (points.com) designed to provide pointsholders ” with the ability to exchange points between various programs.

Points.com, a Toronto based company, was formed in November of 1999 and launched in April 2001 to provide pointsholders with a method of exchanging points between certain loyalty programs or converting points into certain gift certificates. The basic idea here is to provide a facility to enable consumers to reap their rewards faster by making all their points, miles and other loyalty program currencies count. With umpteen loyalty programs in existence and consumers left with piles of small, potentially useless points, the idea of combining or converting points makes a lot of sense.

Points.com participants can set up, without charge, what’s known as a “pointsfolio” to manage their points in one single location. Participants can set up eligible loyalty programs and view their accumulated points in each program on one statement. A drill-down capability also exists to allow viewing of details for each loyalty program.

To participate in points.com, the only mandatory requirement is that participants have an e-mail address to facilitate communication – no a particularly onerous requirement given participants will already have internet access and places like hotmail.com allow users to establish an e-mail address for free.

The points.com site also includes an “xchange calculator” which enables participants to calculate the value of converting points from one loyalty program to another. Between some points programs the exchange is one-to-one whereas between others this is not the case – important information for pointsholders to know before committing to an exchange.

Other features include an “award finder”. Using their “pointsfolio” balance or some other selected number of points, participants can view awards they could potentially qualify for on a program-by-program basis. Points aficionados can even set up “goals” and track their progress along the way.

Granted points.com is still in its infancy but one of the drawbacks with this otherwise good idea is the fact the number of loyalty program participants is somewhat limited. Currently, program participants include the likes of Air Canada, Alaska Airlines, Delta Airlines, Esso, Sprint and Fujifilm to name a few. Many of the participants are US based which can somewhat limit the usefulness of the program to Canadians.

A further drawback is the cost of exchanging points. While setting up a “pointsfolio” is free and new participants are provided with one free points exchange, it costs $5.95 for each exchange of points thereafter. Active points traders are given the option of paying $14.95 per year for an unlimited number of points exchanges. So much for the notion that points programs are “free” but then again they really aren’t free anyways, are they?

Obviously pointsholders will have to weigh the benefits of converting and exchanging points with the value of what they receive in the end. Logically, using points.com to manage and control points in various loyalty programs will become more cost-effective the greater the number of points in your arsenal and the greater the number of points programs you’re involved in.

Jim Maroney is a chartered accountant with Andrews Brown Maroney in Maple Ridge.