New Reward Program Habits May Cost Consumers Money

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Faced with reward program overload, some consumers are opting out — at the risk of busting their budgets.

Loyalty program memberships are up 27 percent from 2010, to a total 2.65 billion last year, according to the 2013 Colloquy Loyalty Census to be released Monday. That works out to an average 21.9 memberships per household, up from 18.4. But consumers aren't quite as loyal — they're active in just 44 percent of those programs, a drop of 4.3 percent from 2010. Participation in some kinds of programs is also down, with 1 percent fewer grocery program members and a 21 percent drop in fuel and convenience store memberships.

As more companies and retailers debut loyalty programs, it's increasingly tough to get shoppers' attention, said study author Jeff Berry, research director for Colloquy. "Most programs seem to be all about the same kind of rewards," he said.

Or as Phil Lempert, chief executive of shopping strategy site SupermarketGuru.com, puts it: "They're boring." Shoppers have little incentive to change their shopping habits, especially with program fine print that often makes earning and redeeming tough.

In the supermarket and gas station realm, for example, many chains have been promoting programs that offer gas discounts based on a shopper's grocery spending. Giant Eagle club members earn 10 cents off per gallon on a single fill-up for every $50 spent in stores, for example. Safeway customers earn a point per dollar spent on groceries and pharmacy purchases, redeemable in 100-point increments for up to $1 off per gallon on a single fill-up.

But in most gas-grocery programs, points earned expire monthly. They may be redeemable only at particular stations that may or may not have the best prices in the area, limiting the value of a 5- or 10-cent discount per gallon. "Those kinds of programs are hitting on the right utilitarian view, but there's a level of complication," Berry said.

The result for many shoppers has been to throw their loyalty behind a credit card rather than a store program. Financial services loyalty program participation rose 28 percent, to 548.4 million memberships in 2012, according to Colloquy.

"People are becoming aware of how much they can save," said Odysseas Papadimitriou,chief executive for offer-tracking site CardHub.com, "and banks are becoming more aggressive about what they offer." According to a site study, in the first quarter of 2013 cash bonuses for new cardholders were up 33 percent compared with the previous year, while point and mile bonuses were up 14 percent. The value of ongoing rewards were up 6 percent. Making the most of bonuses on one card, or even two or three, that offer rewards in broad categories like groceries or gas is easier for people to manage than juggling programs from competing retailers, he says. They can shop around for deals without compromising rewards earned.

Coupon experts say shoppers cutting out store programs are missing out on substantial savings opportunities. "If you don't have membership in these programs, you're throwing away savings," Lempert said.

Chains including Kroger and Safeway have moved in recent months to offer personalized coupons based on shoppers' previous purchases. Many chains now also offer digital coupons that can be loaded to a loyalty card with a few clicks, and redeemed when that card is scanned at checkout, says Stephanie Nelson, founder of CouponMom.com. "You can't take advantage of those digital coupons without participating in the loyalty program," she said.

Loyalty cards also offer some of the better savings available, as chains including Kroger and Publix have amended their coupon policies to limit practices such as doubling (where the store doubles the value of a coupon) and stacking (using multiple store and manufacturer coupons on the same product). With those changes, it's more common to see stores offering discounts redeemable for a future purchase, such as a recent Kroger offer for $5 off after you purchase five General Mills products in one shopping trip, Nelson said. "It's richer in terms of the discount per item," she says. But again, only loyalty program members can grab the deal.

Not all of the savings are financial, either. Without a loyalty program membership,shoppers could miss out on product recall warnings — which many chains now email to those who its records indicate bought affected products, Lempert said.

Experts say the best recourse for shoppers is to do what many are already doing. That is, sign up for all the free membership programs at stores where you shop, and pair them with a no-fee, general rewards card. Use the membership only when it makes sense. Otherwise, said Nelson, "you might as well be shopping at a store that doesn't have a loyalty program."

—By CNBC's Kelli Grant