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Air Miles has cancelled a plan to make points expire after five years. Yet I still hear gripes from collectors.
Here are a few issues that could hurt parent company LoyaltyOne’s hopes of restoring customer loyalty.
Two categories of points
Air Miles quietly launched a new category in 2012 for those who wanted immediate discounts on purchases at participating retailers.
Many collectors didn’t know they had to sign up to earn these types of rewards; only as they scrambled to use points before the Dec. 31 redemption deadline did they learn that discount coupons were not available to them.
“Never the twain shall meet once your miles are designated,” says collector Joel Goldman about the two categories, called cash rewards and dream rewards.
“If you decide to redeem your Air Miles for an item of merchandise and you are short of the number of miles needed in your dream account, you can’t supplement the needed quantity from the miles accumulated in your cash account. Or vice versa.”
Why did Air Miles set up two categories and not allow transfers from one to the other? Here’s an explanation from Smart Money contributor Robb Engen:
Fewer than six in 10 reward miles earned by collectors have ever been redeemed, according to LoyaltyOne’s financial statements. That difference, called “breakage,” makes up a good portion of the company’s profits.
LoyaltyOne told investors it expected nearly all of the cash rewards would be redeemed within 12 months — compared to 42 months for dream rewards. That meant it couldn’t rely on breakage to make money.
Instead, it lowered the value of each cash reward mile to 10.5 cents — from 13 to 15 cents for dream rewards, Engen said.
Members can expect more shifts from dream rewards to cash rewards. LoyaltyOne said devaluing points was a response to a new Ontario law banning expiry dates.
Customer service issues
During the lead-up to the abandoned rule changes, I received hundreds of complaints from Air Miles collectors. Almost all cited long waits to reach customer service. One person said she spent seven hours on hold with the call centre and still didn’t get through to an agent.
To make life more difficult for collectors, Air Miles cut off email contact and restricted communication to phone and live chat on its website.
Many people also found little compassion when they did reach an agent. They were told that rules were rules and no exceptions were allowed.
Only when I forwarded readers’ emails to Air Miles did some collectors finally get a call back and help using their points for rewards. Those Air Miles users were furious to find that media intervention was required.
Air Miles now faces calls from those who want to return merchandise or head off orders that have yet to be delivered. Service is still poor.
“I’ve called Air Miles many times and faced nothing but long waits,” said collector Ann Misetich. “I called Dec. 8 at 5:49 p.m. and was still on hold at 7:19 p.m., while hearing a recording that my wait time was expected to be 16 to 24 minutes.”
The two-year rule
While Air Miles can no longer expire, you can still lose them all if you don’t collect new points or redeem existing points over a two-year period.
The Ontario law doesn’t stop loyalty plans from confiscating the points of inactive collectors — often without notice.
Rival program Aeroplan began closing dormant accounts more than a decade ago. It has a strictly enforced one-year activity rule and makes collectors pay stiff fees to buy back their miles.
Air Miles originally didn’t enforce the activity rule in its terms and conditions. But the formerly lenient attitude has changed.
While both programs make an effort to notify collectors, they often send emails to former addresses that don’t work any more.
“Air Miles maintains that letters warning of impending loss are sent to collectors,” says Joel Goldman, “bur my wife did not receive one.
“When I called to explain, a wall of zero tolerance was placed before me. It made little difference that I was an Onyx collector (the highest level) or that my wife and I have been zealous collectors since the program started close to 25 years ago.”
Shop around for loyalty plans. Many give cash rebates to use as you like. Isn’t that better than having to choose from a shrinking supply of prizes and having to pay cash up front to get them?
Watch out for extra fees on airline flights. Consumers pay higher surcharges for Air Miles flights than for the same flights bought directly from the airline, according to a media report. Air Miles won’t let you use your points to pay extra fees, but other loyalty plans allow it.
Read reviews of customer service. It’s no use to collect reward points if you can’t redeem them easily. Loyalty plans make money from points collected and not redeemed. Look for companies whose service is above average in online reviews.
Ellen Roseman’s appears each week in Smart Money.