Store loyalty programs are taking your personal data and may use it to charge you more. Here’s how to protect yourself.

Store loyalty programs are taking your personal data and may use it to charge you more. Here’s how to protect yourself. Store loyalty programs used to be simple: You’d get a punch card at a local sub shop, buy eight sandwiches and get your ninth for free. It felt like a transparent “thank you” for your business. But today, that punch card has been replaced in many cases by a “loyalty trap.” It can be fun to track points and rewards for your favorite store in order to figure out when you’ll earn your next free drink or $10-off coupon — but today, customers often sacrifice their valuable personal data for deals that are increasingly lackluster. In fact, companies have been treating loyalty programs less like reward systems and more like data-harvesting tools, an October report from the Vanderbilt Policy Accelerator and the Center for Consumer Law & Economic Justice at University of California Berkeley found. The goal isn’t just to reward you, but to profile your behavior and discover the maximum price you’re willing to pay. The scale of these programs can be vast. For instance, McDonald’s MCD-1.33% rewards program aims to reach 250 million active loyalty users by 2027, the report said, “a scale rivaling that of a national intelligence agency.” McDonald’s declined to comment on the record to MarketWatch. “Companies have gotten so consumed with the data that they can collect,” said Craig Miller, a business strategist and consultant who helped Sonic Drive-In develop its digital strategy. “But they’ve lost sight of the customer.” Read more: Carnival Cruise is making a key change to its loyalty program revamp The stakes of this data-for-discounts trade extend beyond a few missed freebies. Consumers might not just feel obligated to shop at a specific store because of their membership, but they could also end up paying more than they did before. By dangling an enticing offer like a 25% discount, companies are luring shoppers into a surveillance infrastructure that tracks their moves in order to discover how much price pain they can tolerate. Spelling out your email address to a cashier for a free rewards program seems innocent enough — but that’s often just the first step. Your favorite store might offer enticing up-front benefits to hook you. If signing up for free gets you a significant discount on the purchase you’re making that day, then handing over your name, email address and phone number doesn’t seem like a bad tradeoff. From the archives (May 2025): Premium travel perks like VIP lounges and rewards points offer less than they used to — but these upgrades are still worth it However, programs often request your consent to track purchases and build a shopper profile when you sign up — often buried in terms and conditions that most people click through without reading — making it possible for these companies to start seriously tracking your data. In some cases that can look like gamification, where companies use casino-style tactics to keep you engaged. For instance, some companies have mini-games in their apps to gain insight into consumer habits and preferences, according to the report, while others offer freebies for completing feedback surveys. “What kind of personal information are you providing, and what is that worth to you as a consumer?” said Yuping Liu-Thompkins, an associate dean in Old Dominion University’s marketing department, where she researches customer loyalty. “The privacy and data aspect of the exchange is something that tends to be overlooked.” After collecting data that provides insight into customer preferences and willingness to spend, the value proposition can shift. The company might choose to devalue points, raise fees or make it difficult to leave the program. Amazon Prime is a classic example, having raised its prices several times over the years — the most recent price hike was in 2022, when it jumped to $139 from $119 a year — after getting millions of its users hooked on free, fast shipping. Amazon AMZN+0.01% did not immediately respond to MarketWatch’s request for comment. Deleting an app or canceling a membership is usually not enough to scrub your personal information, because companies can continue to store the data of inactive users. Before taking either of those steps, go into the app and manually delete information like your birthday, phone number and saved addresses. If the company does keep an archived version of your account, feeding the system blank data adds a layer of protection. From the archives (Feb. 2022): Amazon Prime is raising its price: Here’s how much it has gone up over the years The Vanderbilt study describes loyalty programs as “ground zero” for the e-commerce industry’s shift toward surveillance pricing, where individualized data is used to charge each consumer the maximum price they will tolerate, rather than a set uniform price. “Some companies are using consumer data in a way that generates real value, but others use it in more exploitative ways,” Liu-Thompkins said. “It really depends on how that data is being applied.” This practice of individualized pricing is already bleeding into other areas of the economy. A December report from the Groundwork Collaborative found that the grocery-delivery service Instacart CART+0.37% runs pricing experiments, unbeknownst to shoppers, sometimes showing five different prices to different people for the same dozen eggs. Researchers estimated that these opaque price swings — designed to gauge a customer’s individual price sensitivity — could cost a family of four up to $1,200 a year. Instacart said 10 of its retail partners test different prices on Instacart, but denied that the tests are surveillance pricing because they are limited, randomized and don’t use demographic or user-level behavioral data to set prices. “For example, a customer may see slightly lower prices on everyday essentials, such as milk or bread — the items families care about most — and slightly higher prices on less price-sensitive products, like craft beverages or specialty snacks,” an Instacart spokesperson said in an email to MarketWatch. To determine which loyalty programs are worth it, Liu-Thompkins recommends considering the following: If you aren’t using the points that come with a program, there’s no actual value to signing up. Consumers should ensure the program allows them to easily and frequently redeem their perks. If it’s three months, maybe that’s a reasonable amount of time and spending. But if it takes a year or longer, the program’s appeal — and potential payoff — becomes a lot weaker compared with those that offer quicker rewards. Loyalty programs can change your purchasing behavior and lead you to pay higher prices or buy unnecessary items just to meet a threshold. McDonald’s doesn’t set prices based on a customer’s loyalty status, but the average customer visits the fast-food chain 26 times in the year after joining its loyalty program, compared with 10.5 times the year before joining. Even analog reward programs can alter consumer behavior because of the “endowed progress effect.” This happens when you get a punch card at a coffee shop or nail salon, for instance. If your first punch is free, the consumer has an artificial head start and is incentivized to keep visiting to eventually get that free coffee or service. When joining a rewards program, you’re ultimately paying with your data. Consider whether the value of the rewards is worth the privacy trade-off, as your personal information could end up in a database alongside thousands of others, making it an easy target for hackers. You also might receive an influx of unnerving targeted advertisements. “Whether you sign up for the loyalty program or not, companies often still have your data,” Liu-Thompkins said. “The question for consumers becomes, ‘What value am I actually getting in return for the company’s use of my data?’” What personal-finance issues would you like to see covered in MarketWatch? We would like to hear from readers about their financial decisions and money-related questions. You can write to us at readerstories@marketwatch.com. A reporter may be in touch to learn more. MarketWatch will not attribute your answers to you by name without your permission. Genna Contino is the Smart Spending reporter on MarketWatch's personal finance desk. She previously covered personal finance for CNBC as well as city hall for The Charlotte Observer in North Carolina. She graduated from the Craig Newmark Graduate School of Journalism at the City University of New York in 2024. Copyright © 2025 MarketWatch, Inc. All rights reserved.