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Looking for ways to shop and save? Loyalty programs reward you for using your favorite brands or payment methods.
Often referred to as rewards programs or points programs, loyalty programs offer benefits when you make repeat purchases. They might include free items, discount codes, or access to special deals.
In this article, learn how loyalty programs work and the potential pros and cons of using them.
Table of contents
A loyalty program is a strategy companies use to encourage repeat business, because it’s more expensive to acquire new customers than to keep existing ones. They give you perks for repeat purchases to earn long-term loyalty and trust.
Loyalty programs come in various formats, each designed to cater to different shopping behaviors and preferences. Points programs and cash back programs are two of the most popular, but there are many more:
While both loyalty and referral programs offer rewards, they cater to different aspects of customer engagement. Loyalty programs focus on rewarding repeat business, while the different types of referral programs reward you for successfully referring new customers to a brand. These programs often provide benefits like cash back, discounts, or bonus points when a referred individual makes their first purchase.
Many programs combine both loyalty and referral rewards into the same account. If you really love a particular brand, you can sometimes get additional rewards by sharing it with people you know and getting them to use a specific link or code.
Loyalty programs | Referral programs | |
|---|---|---|
How to get rewards | Repeat purchases with the brand | Referring new customers to a brand |
How they’re tracked | An app, email address, or phone number | Unique referral codes or links |
When to use | Brands that you make purchases from regularly | Brands you want to introduce your friends or family to |
The core function of these reward programs is that you gain small benefits each time you make a purchase.
Usually, you need to sign up for an account, download an app, or pay to access rewards that are tied to your contact information or account. Over time or with multiple interactions, you gain rewards like discounts, free products, offers, cash back, or the option to pay with rewards.
Good loyalty programs offer clear terms, easy redemptions, and perks that feel worth it. The following examples describe loyalty rewards programs with features that appeal to large numbers of people:
Program | Program type | What works |
|---|---|---|
1. PayPal Rewards and Cash Back | Cash back program1 | Flexible rewards to spend at partner brands |
3. A department store’s membership | Paid membership | A large number of perks under one program |
3. A department store’s membership | Paid membership | A large number of perks under one program |
4. Fast food points program | Points loyalty program | Easy app-based redemption |
5. A clothing brand’s cash back program | Cash back loyalty program | Rewards for shopping in-store |
6. An online retailer’s membership | Paid membership | High-value membership with delivery perks |
7. A software brand’s referral benefits | Referral rewards program | Get additional benefits for helping the brand acquire new customers |
The core benefit of loyalty programs is that they reward you for repeated purchases, which can result in savings.
Loyalty programs also often allow brands to learn more about your preferences for additional personalization. Especially online, these personalized, AI-driven shopping recommendations can make your experiences more convenient. It's important to spend within your budget categories and plan your purchases for the greatest impact.
Participants in loyalty programs typically retain control over their privacy settings, so you can usually decide how much information you’re comfortable sharing.
Loyalty programs come with possible benefits and risks to keep in mind:
Potential pros of loyalty programs:
Potential cons of loyalty programs:
Loyalty programs take many different forms, even within a category, for example, points programs. Multiple points programs might have different terms and conditions.
It’s possible to earn rewards in several categories, like food and dining to retail, entertainment, travel, and even pet products.
Here are some signs a loyalty program might fit your budget and lifestyle:
The right loyalty programs reward you for shopping that you already do. When you redeem rewards, the experience should make you feel good about your budget.
PayPal Rewards let you earn cash back rewards with the brands you love.1,2 With a PayPal Debit Mastercard®3, you can pick a category each month and get 5% cash back on up to a $1000 spend.4
It's your do-it-all digital wallet. Load up on cash back offers before you shop. Track your packages. And manage it all on the go.