February 2021
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Are Shopper Loyalty Programs Worth It?
Understanding the risks and benefits

Shopper loyalty programs may seem like an easy way to save money on your favorite products. The choice to sign up for exclusive savings and customized coupons may seem like a no-brainer — however, these savings come at the cost of your personal data being sold to marketers. Here’s what to know about the benefits and risks of these store loyalty programs, so you can decide whether you’re comfortable with participating.

Understanding loyalty programs

Stores pitch their loyalty programs as a way for you to get exclusive deals tailored to your buying habits. These programs encourage you to return to the store time and time again, so you don’t miss out on any special offers or rewards. However, these savings aren’t charity programs run by your local big-box retailer — it’s all a part of a broader strategy for the company. According to Donna L. Montaldo, a contributor to The Balance Everyday, a loyalty card gives retailers valuable information on your buying habits, demographic data, and lifestyle. If there’s an associated rewards program that lets you earn points for every dollar spent, Montaldo explains that this can coax you into doing more of your shopping at the store in question. Plus, loyalty programs foster a positive view of the company, all while being cheaper to maintain than marketing campaigns to win new customers.

Consumer advocate concerns

Consumer loyalty programs allow corporations to store, sell, and trade your personal data. On top of that, if the retailer or any of its partners becomes lax with its security, your information is liable to be stolen by hackers. At first glance, it may not seem like a big deal if hackers learn which brand of cat food you buy, what over-the-counter medications you take, or how often you purchase wine. However, Martin H. Bosworth, a journalist for Consumer Affairs, warns that your friendly neighborhood grocery store may be collecting a surprisingly invasive profile of your lifestyle. For instance, the grocery chain Safeway collects personally identifying data, including your credit card number, home address, phone number, and checking account ID number. In addition to the potential to have your data breached, Bosworth explains that stores have handed this personal consumer data, as well as your purchasing habit information, to law enforcement, allowing the police to circumvent Constitutional and Federal laws that disallow government agencies from creating databases on citizens. Furthermore, Bosworth cautions that your data could be sold to employers, insurance providers, and anyone else willing to fork over money to learn about you. This information can be used to build a profile that includes whether you’re married, information on your children, whether or not you use family planning products, what kind of food you eat, how much alcohol you consume, how much you spend, and what health problems you suffer from. That data could impact your insurance premiums, factor into a psychological evaluation, or be used to influence court decisions, states Bosworth.

Loyalty program alternatives

If you’re uncomfortable with participating in customer loyalty programs, you always have the choice to opt out of them, Bosworth explains. He also suggests contacting the company’s customer service division and seeing if you can have yourself removed from the company’s database. You can also shop at stores that don’t have loyalty programs, which may offer lower prices to begin with. However, Montaldo warns that virtually all customers are tracked to some degree, particularly those who pay with credit cards. That said, Montaldo suggests visiting your credit card company’s website to see if you can opt out of certain consumer-tracking programs.

Some shoppers enjoy the coupons and deals that customer loyalty programs provide, while others feel that the benefits don’t outweigh the risks of their data being passed around to third parties. For more information on the programs that you’re enrolled in, contact a customer service representative or visit the retailer’s website to read up on the fine print.

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