Who Needs Cash When You’ve Got Loyalty? The Rise Of A New Type Of Currency

A coffee card with nine stamps and one empty square can make the tenth drink feel like a small financial victory, and the same feeling turns up at the supermarket when the receipt announces another batch of points, or when an airline app points out that you’re only a few thousand miles away from a flight.

Loyalty schemes have come a long way from the paper stamp card, with points now earned, tracked, swapped and spent through apps and partner networks, which gives them a value that acts a bit like money without being money. You can’t pay your rent with coffee stamps, but you might be sitting on a stash of rewards that’s worth more than you think.

From Paper Stamps To A Points Balance In Your Pocket

The paper card has mostly been replaced by an account in an app, where shopping, subscriptions and partner offers all land in one balance that you can check whenever you fancy. Tesco Clubcard works like this; members generally collect one point for every £1 spent on qualifying purchases and can request vouchers through their online account or the Tesco Grocery & Clubcard app.

Airlines do the same thing on a bigger scale. Avios, the reward currency used by British Airways, is also used by Iberia, Aer Lingus, Vueling, Qatar Airways and Finnair, and you can build a balance away from flights too, through selected credit cards and other partners. For example, eligible Avis car hire bookings can earn Avios. The rate depends on the partner and the applicable terms, but linked accounts make it possible to turn everyday spending into rewards you can use for travel.

So, What Is A Loyalty Point Actually Worth?

There’s no universal exchange rate, and even one scheme can put different price tags on the same points. A Clubcard point is worth 1p as a voucher in Tesco, so 10,000 points gets you £100 to spend at Tesco. Its 100-plus Reward Partners can double the value of eligible vouchers, which could stretch the same balance to £200 towards days out or a meal at a restaurant.

The small print changes the sums again. Clubcard vouchers expire two years after they’re issued, while Reward Partner codes typically last six months. Avios can expire after 36 months without qualifying account activity, including collecting, spending, buying or sharing Avios. The number you need for a flight also depends on the route, cabin and available reward seats. A balance that looks like a decent savings pot on screen can look a lot thinner once you start searching for dates.

Why Businesses Are Happy To Pay You In Points

For a business, a point is a reason for you to come back. If you’re a few points short of a reward, you might throw something extra in the basket to get there, and the loyalty account also shows the company what you buy and how often, within whatever privacy rules apply. Partnerships stretch this further by giving customers more ways to earn and spend rewards across different businesses.

Nectar and British Airways show how that works – Nectar points, which can be earned through shopping at participating retailers such as Sainsbury’s, can be converted into Avios and back again.

Every 400 Nectar points converts into 250 Avios, while 400 Avios converts into 400 Nectar points. The conversion rates aren’t the same in both directions: convert 800 Avios into Nectar points and then back again, and you’d be left with 500 Avios.

Each programme gets another reason for people to keep collecting, but the maths makes it important to check the conversion rate before swapping.

Can Loyalty Points Really Become A Currency?

Points do share some traits with money, since they represent value you can swap for goods, services or discounts, and some can move between programmes, like Avios across several airlines or Nectar points into Avios. Apps make the balances easy to check and spend.

The limits are just as clear, because the company that issues the points decides what they’re worth and where they can be used. Tesco reduced the standard boost on Reward Partner vouchers from triple to double in June 2023, showing that the value customers get can change. Points also can’t be spent everywhere that takes cash. They work like a currency inside a network, but that’s a long way from a universal one.

Your Points Only Help If You Use Them Before They Expire

Plenty of people now carry a little collection of reward balances alongside their bank accounts, each with its own rules and expiry date.

They can knock a bit off a food shop, a hotel stay or a flight, but only if you know roughly what your points are worth and use them before they lapse. An expired voucher buys nothing; a big balance feels like progress, yet it’s only worth something once you spend it, but it definitely still won’t cover the rent.