Are Loyalty and Rewards Programs Passive Income?

Woman holding card while operating silver laptop

Loyalty and Rewards programs have been around for a very long time.  From that big bulk store membership card, to the fast food restaurant “10 stamps and the next one is free” style card, this type of marketing strategy has been a mainstay for decades and will surely continue for many more.  But can these types of programs really be considered as a form of passive income?


You scratch my back…

Loyalty cards, rewards cards, points cards, club cards… these programs go by many names but are effectively the same thing.  Ultimately they are a marketing method that encourages consumers to keep shopping at the same brands by rewarding them with points, cash-back, miles, or similar.  These points can then be exchanged for goods and/or services by the consumer at reduced or potentially no additional charge.

These programs are usually attached to a physical card of some sort, and sometimes also bundled to a credit card.  Some programs may charge an annual fee (such as a club card or roadside assistance), while others are free but require you to sign up.  Again the goal being to drive you and your purchasing behavior to the retailer(s) or brand(s) supported by the loyalty program.


Show me the money!

So what kinds of loyalty programs are out there for Canadians?  Here’s just a few of some of the more well-known options (in no particular order):

  • Air Miles
  • Aeroplan
  • Triangle Rewards (Canadian Tire)
  • CAA
  • HBC Rewards
  • PC Optimum
  • Petro-Points

Some of these are stand-alone cards while others offer a credit-card linked version in addition to the base card, giving the consumer the ability to double up on rewards if you use both cards in conjunction.


Wait, I thought credit cards were bad?

Credit cards can be a polarizing topic.  People have strong feelings and opinions about them, and for good reason.  Without proper discipline credit cards can create a mountain of debt that is difficult to get out of.  High interest rates and low minimum payments can lead to years of repayments.  This is why some people say credit cards are bad and that they should never be used.

With that being said, when a loyalty program offers a credit card linked version in addition to the base card there may be the opportunity to “double-dip” on the rewards by using both cards for the same transaction.  This is a situation where using a credit card can really work in your favor… so long as you follow the following rules:

  1. You have well-defined monthly budget
  2. You use your credit card(s) only for things that you would be purchasing normally and have budgeted for
  3. You don’t binge spend or spontaneously purchase items solely for the purpose of earning extra or bonus points
  4. You pay it off IN FULL every single month, not incurring a single cent of interest charges

If you follow these rules you can rack up even more rewards points that you would have if you had just used the base rewards card.  If you cannot follow these rules then you would be better off not obtaining one of these credit cards and just stick with the base rewards card.


So can we honestly call these a passive income source?

In the end the answer ultimately is – it depends.  The sole purpose of these marketing platforms is to manipulate your spending patterns.  If you are a disciplined consumer and only use these rewards programs for purchases that you would have made regardless, then yes I would say that this is a passive income source.  However if you find yourself purchasing items you wouldn’t have otherwise purchased, chasing bonus points or offers, or otherwise spending in extraordinary ways then I would argue that it is not a passive income source.



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About the Author: passivedub

Hey, I'm a regular joe trying to find a better way to earn money and live a better work life balance. I'm not a financial advisor, I'm just sharing my thoughts and experiences on different ways to make passive income.

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