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Are Loyalty Programs Worth It?

If you’ve ever spent money anywhere, you’ve probably heard of a little something called a loyalty program. Let’s face it, you can’t jump on a store’s website or even check out at a retail store without being asked if you want to join. While some loyalty programs are great and can actually save you money, others are straight-up terrible—and it’s your job as the consumer to know the difference.

Don’t worry, I’ve done the hard work for you and researched a few of the best loyalty programs out there and even a few of the worst you should avoid at all costs (even if they’re technically free).

What Are Customer Loyalty Programs?

Customer loyalty programs are a clever marketing tactic retail stores and online companies use to keep their customers coming back (again and again). The incentive of free stuff or dollars off your next purchase goes a long way for the average shopper—especially if it’s a brand you love. Just be aware that loyalty programs aren’t always in favor of the customer. Some are designed to help the retailer earn even more money. That being said . . . who would turn down a free coffee at their favorite coffee shop? 

Most Common Types of Loyalty Programs

In the world of loyalty programs, rewards are in the eye of the retailer. So, retailers have come up with a few different types of programs to reward their most loyal customers:

1. Punch Card Loyalty Programs

This one is an oldie but a goodie. And honestly, you probably won’t find too many stores that still operate their rewards program with a punch card these days. But you get the picture . . . buy a sandwich, get a punch on your rewards card. Eight sandwiches later, you’ve got yourself a free turkey and cheese on sourdough (or in my case, gluten-free bread for a pesky $2 upcharge)!

2. Points-Based Loyalty Programs

More and more stores are jumping on the points bandwagon these days. The idea is simple: Earn one point for every $1 you spend. Collect enough points (or spend enough money), and you earn a reward.

3. Tiered Loyalty Programs

Sephora is the queen of the tiered loyalty program. When you become a Beauty Insider, the more you spend, the more points you get. When you spend $350 within a year, you get bumped up to VIB status or “Very Important Beauty” status. When you spend $1,000 in a year, you hit “Rouge” status. Companies like Sephora want you to want that next tier of loyalty. When you spend more, the company earns more (and you get more perks the higher up you go). For instance, if you become a Rouge member, you’ll have access to a private hotline to chat with a beauty advisor. Sephora also holds Beauty Insider store events (just for loyalty program members).

4. Cash-Back Loyalty Programs

Everyone loves cash. And cash back on spending is even better—especially when it comes from your favorite stores you already shop. Stores like CVS have mastered the art of cash back (and the art of printing the longest receipts known to man).

5. Fee-Based Loyalty Programs

You might think the idea of a fee-based loyalty program wouldn’t be too popular, right? That’s what I thought. But it turns out, if the offer is good enough, people will pay to become a member of that inner circle. Take Amazon, for instance. Their loyalty program is called Amazon Prime. And when you’re a Prime member, you get free shipping on orders, deals at stores like Whole Foods, and even free movies on their streaming platform.

How Do Customer Loyalty Programs Work?

Customer loyalty programs are a little like fishing. Companies put together a loyalty program they think will help them keep their customers for the long haul (that’s the bait) and try to offer a few incentives to keep the customer (that’s the fish) happy and spending,

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Some loyalty programs put the customer first (without hurting their bottom line) and others just want you to think they do. You can pretty much spot the good from the bad right away. For instance, if a sandwich company wants you to earn 300 points for $2 off your next $8 sandwich . . . that’s a bad deal (and probably not a great sandwich either).

Best Loyalty Programs

All right, folks, I know you love a good loyalty program as much as I do (as long as it doesn’t tempt you to bust the budget). So, I’ve come up with a few of the best and worst customer loyalty programs out there. Depending on your loyalty, you might agree or disagree with some of these. And that’s okay. We can agree to disagree. Plus, it’s your American right to have opinions, even if they’re wrong.

Okay, here’s the first:

1. Chick-fil-A:

With Chick-fil-A One, you can earn 10 points per dollar (not too bad). But with every loyalty program comes a little bit of strategy on your part. The key—when spending your points—is to find the menu item with the lowest number of points per dollar. Let me give you an example: You can get a chocolate chip cookie for 150 points, but that cookie normally costs $1.29. That’s about 116 points per dollar—that’s a good value! Now, on the flip side, a small side of macaroni and cheese is 500 points (good grief) but it only costs $2.55. That’s costing you 196 points per dollar . . . not a great value. Are you picking up the nerd-ery I’m putting down?

I can’t talk about Chick-fil-A’s loyalty program without sharing my absolute favorite hack: Fill out those surveys on your paper receipts and in the app! (Make sure you ask for a receipt in the first place.) If you fill it out, you get a free sandwich—and for all you chicken lovers, that’s a big deal.

2. Starbucks

Listen folks, if anyone is a Star earner at Starbucks, it’s me. No shame in my Star game. I’m sure all you Starbucks lovers out there have found your own ways to enjoy your rewards by now, but these are a few of my favorites: If you “earn” enough points to get a handcrafted drink (that’s 150 points), then you can order the most expensive drink you can think of. Like a venti, no-whip, half-caf, white chocolate mocha with five pumps and an extra shot, made with soy. You know what, scratch that. Coconut milk. We’re going full keto. P.S. What kind of monster orders a half-caf beverage but then adds an extra shot of espresso? Anyhoo, if you’re not a fancy drink person, you could get a plain brewed coffee and load it up with add-ins using your points—which only costs you 50 points instead of 150.


CAVA is a personal favorite of mine (it’s the food of my people!). And if you haven’t heard of them, I like to say it’s like if Chipotle got a master’s degree from a Mediterranean culinary school. It’s delicious.

Here’s how their rewards work: You get $8 when you spend $88. And when you sign up, you get a $9 birthday credit. While their meals are a little pricey at $10–15 each, my wife and I can fill up on just one bowl between us—it’s filling and healthy!

One thing to note: You have to spend your $88 within 150 days or your rewards get reset. But at $15 per meal, you’d only have to eat there once a month to rack up that $8 reward. And since one meal can feed two people, it’s not a bad deal!

4. Papa John’s Pizza

This one is my friend Rachel Cruze’s personal favorite. And if you like more sauce in your sauce-to-cheese ratio, you’ll probably like them too.

When you join Papa Rewards, you get one point for every $1 you spend online or in the store. When you rack up 75 points, you get $10 in “Papa Dough” (clever, I’ll admit) to spend on any item. If you love pizza, it’ll be pretty dang easy to rack up those points.

5. Southwest Airlines

Let me state the obvious: Flying is expensive. That’s why I’m always scouring Scott’s Cheap Flights for deals and trying out every other travel hack I know. But when it comes to earning points for traveling, you can’t go wrong with Southwest’s Rapid Rewards program.

You earn points for every flight you pay for when you use cash, gift cards, vouchers, etc. Really, anything but points. (If you could earn points by spending points, that would be awesome. Just saying.) The points you earn depend on the final amount you spent on fare . . . so it’s different every time.

Here’s a bonus hack for you: If the price of your flight drops after you book, you can rebook that same flight and get points or flight credit back to your rewards account. Score! If that doesn’t get you to fly Southwest, I don’t know what will.

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Worst Loyalty Programs

All right, we’ve heard about the best loyalty programs out there. Now, I want to talk about a few of the worst and why you shouldn’t expect a whole lot from these companies (at least in the way of rewards). Side note: I would never tell you not to shop or eat at one of these places. I’m just giving you a look inside their loyalty programs—and why you shouldn’t bank on them.

1. Subway

Here’s the deal with Subway. You get four “tokens” for every $2 you spend. When you rack up 200 tokens, you get a $2 reward. Let’s crunch the numbers: You have to spend $50 to get . . . $2. Not a great deal—by a long shot. Subway, be better.

2. Old Navy/Banana Republic/Gap

We grouped these three retailers together because they’re all owned by the same company (and they’re all in the same family). Their loyalty program is even worse than Subway’s: You get one point for every $1 you spend. When you rack up 100 points (or spend $100), you get . . . a whole $1. Ouch. What’s the point of having a loyalty program? Finding a dollar on the sidewalk is more exciting than this. Come on, people!

3. Chipotle

Who doesn’t love a good burrito? I’m a Chipotle fan myself, but I’m not a big fan of their loyalty program. Chipotle gives you 10 points for every $1 you spend. I know that sounds like a lot, but in reality, it doesn’t get you far. With 425 points, you can get yourself a free bag of chips and salsa. Whoop-de-doo. Here’s the sad math: You’d have to spend $42.50 to get something that costs $2.15 for free. And if you’d rather have guac with those free chips, hold your horses . . . because you need a whopping 700 points for that. Yikes.

4. Target Circle (Different Than the RedCard)

I love Target. You love Target. We all love Target. And I don’t want to burst your bubble here, but if you’ve been loyal to the Target Circle program, you may not be getting the best deal out there. But before I share more, I need to make sure you know I’m not talking about the Target RedCard (the debit card). I’m just talking about the loyalty program. With Target Circle, you earn 1% on “eligible” purchases along with some deals and a 5% birthday reward. But with the Target RedCard (the debit card), you earn 5% on all purchases (to be redeemed on future purchases), free shipping, deals and an extra 30 days for returns. If you’re wondering which is the better deal . . . it’s the RedCard (again, the debit card, not the credit card!).

Loyalty Programs Do’s and Don’ts

Do your research.

I’m a research nerd. I just love it. And whether you love it or think it’s for the birds, I beg you: Do your research. Just because a company is giving out 100 points, it doesn’t actually mean it’s worth your money. Remember, a loyalty program is a marketing tactic. Some are more clever than others, but the main reason for them is to get you to spend more money. Just be sure you’re spending money on things you already planned on (aka make sure it’s in your budget).

Don’t spend just to save.

Everyone wants to save money on the stuff they buy (myself included). But just because a store is having a sale, it doesn’t mean it’s a good deal. And here’s the bottom line: If you’re buying something just because it’s on sale . . . you’re not winning. The company is.

Use programs at places you go to often.

If you’re a frequent shopper at your local grocery store, why not go ahead and join their loyalty program? And if you’ve budgeted for a weekly coffee run, go ahead and join their rewards program. Listen, loyalty programs are like the cherry on a sundae. You’re already going to have the sundae, so why not get the free cherry on top? Do what makes sense for your budget and your spending habits.

Don’t think you’re going to beat the system.

If you join loyalty programs because you want to “stick it to the man,” I’m going to burst your bubble: These companies are smarter than you. They wouldn’t have programs like these if they were losing money on them, would they? Of course not! Many of these companies have taken notes from the credit card companies (it’s not a coincidence loyalty programs and credit card rewards programs look eerily similar with confusing points systems).  That doesn’t mean it’s a bad idea to sign up for a loyalty program or three—as long as they’re good ones. But don’t try to game the system or make it your goal to beat these companies at their own game.

All right, folks. Hope you’ve learned a lot about loyalty programs here, but I have to say it: The best loyalty program out there is your budget. The best cash-back hack is paying attention to your money and keeping more of it with you. No matter how many stars, points or stamps you are away from a free item—loyalty programs aren’t worth it if it’s not in the budget.

And if you’re not doing a regular budget, what are you waiting for? Check out EveryDollar. It’s my favorite budgeting tool, hands down. Not only is it easy to create a budget, but it’s also easy to track spending and make changes on the go. The best part? It’s free. But to be clear, the only points you’ll get for doing a budget are brownie points. Sign up here and create your first budget today.

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George Kamel

About the author

George Kamel

George Kamel is a personal finance expert, certified financial coach through Ramsey Financial Coach Master Training, and nationally syndicated columnist. George has served at Ramsey Solutions since 2013, where he speaks, writes and teaches on personal finance, investing, budgeting, insurance and how to avoid consumer traps. He co-hosts The Ramsey Show, the second-largest talk show in the nation. He also hosts The EntreLeadership Podcast and The Fine Print podcast, which has over one million downloads. You can find George’s financial expertise featured in the U.S. Sun, Daily Mail and NewsNation. Learn More.

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