The Problem
They call it “breakage.” You call it losing your points.
“Breakage” is the industry term for the revenue companies earn when customers fail to redeem their loyalty points. It's not a bug. It's the business model. And it accounts for billions of dollars every year.
The scale of the problem
44%
of loyalty members say points expired before they could use them
Source: Bond Brand Loyalty Report, 2024 ↗$208M
in breakage-related revenue recognized by Starbucks in FY2024
Source: Starbucks FY2024 10-K, p. 42 ↗70%+
increase in consumer rewards complaints to the CFPB
Source: CFPB Credit Card Rewards Report, May 2024 ↗How breakage actually works
When you earn loyalty points, the company records a liability on their balance sheet. They owe you something. Under accounting standards (ASC 606 / IFRS 15), companies can estimate what percentage of points will never be redeemed. That estimated breakage is recognized as revenue.
In plain English:
Companies literally forecast how much of your earned rewards you won't use, and book that as profit. The higher the breakage rate, the more money they make from your unredeemed points.
This isn't an accident. Programs are engineered with complex redemption rules, short expiration windows, and confusing tier structures specifically to increase breakage. The point isn't to reward loyalty. It's to create the appearance of rewarding loyalty while maximizing the value that flows back to the company.
And when companies decide to devalue points, change redemption rates, or expire balances overnight? There's often no obligation to notify you, no compensation, and no recourse.
Even the savviest points hackers spend hours hunting loopholes and timing redemptions just to get fair value from their rewards. That's the game for less than 1% of loyalty members. The other 99% just lose.
Real cases
Companies that made billions from your forgotten points
Starbucks
$208Min breakage-related revenue recognition (stored value card and rewards program), reported in FY2024 SEC filings.
Source: Starbucks FY2024 10-K, p. 42 ↗Aeroplan (Air Canada)
$530Mclass action settlement after millions of members lost accumulated miles due to sudden program changes.
Source: Globe and Mail / apsettlement.ca ↗AIR MILES
8.7Bmiles nearly wiped out before Ontario passed emergency legislation forcing the company to reverse expiration.
Source: CBC News, December 2016 ↗Staples / Easy Rewards
$2M+class action settlement for allegedly misrepresenting how rewards could be earned and redeemed.
Source: classaction.org ↗The tide is turning
Regulators are paying attention
Governments and consumer protection agencies around the world are beginning to challenge the breakage model.
CFPB (Consumer Financial Protection Bureau)
Issued Circular 2024-07 warning that deceptive devaluation of loyalty points may violate federal consumer protection law.
U.S. Department of Transportation
Launched investigation into airline loyalty programs for deceptive practices, including opaque devaluations.
Australia ACCC
Published guidance classifying loyalty points as consumer rights, putting expiration practices under scrutiny.
European Union
Digital Fairness Act proposals include provisions addressing unfair loyalty point expiration and devaluation.
This doesn't have to be how loyalty works
The first step is knowing how the system works. The next step is supporting something better.