What is a loyalty breakage?

Loyalty breakage is the gap between the total loyalty points earned by customers and the points actually redeemed for rewards.

From a financial perspective, breakage represents the portion of issued rewards that will never be claimed. While it is a primary metric for assessing the financial liability on a company’s balance sheet, it is also a powerful diagnostic tool for estimating the overall health and engagement levels of a loyalty program.

How to calculate loyalty breakage rates?

To calculate your loyalty program's breakage rate, follow these 3 simple steps:

1. Identify the total number of unused points (this includes all unredeemed points in your program).
2. Determine the total number of points issued, including those that have expired.
3. Divide the number of unused points by the total number of points issued.

What is the average loyalty breakage rate?

Breakage varies significantly by industry. While a "one-size-fits-all" number doesn't exist, historical data suggests the following benchmarks:

• Retail: ~25%
• Travel & airlines: often 30% or higher (due to complex routing and high point requirements).
• General benchmarks: most healthy programs fall within the 5–30% range.

Factors such as program structure, the "value" of a single point, and how aggressively a brand communicates expiration dates will all influence these percentages.

Is high loyalty breakage bad?

There is a classic tension regarding breakage. CFOs often view high breakage as a "win" because it correlates with lower program costs and reduced debt on the balance sheet. Some brands even engineer high breakage by setting high redemption thresholds or short expiration windows.

However, modern growth teams argue that excessive breakage is a "silent killer":

• Declining engagement: high breakage is a leading indicator that your rewards aren't compelling or your UX is too difficult.
• Higher churn: data shows that "redeemers" (customers who use their points) churn 8–20% less than non-redeemers.
• Competitive risk: if a customer feels their points are impossible to use, the "switching cost" to move to a competitor drops to zero.

What are the leading causes of high loyalty breakage?

There can be several factors that contribute to high loyalty breakage rates:

• Complex redemption process – if the process of redeeming rewards is overly complicated, members may be discouraged from using their points or miles altogether.‍
• Lack of compelling rewards – programs that offer unsatisfying rewards are likely to see higher breakage rates as members are less motivated to redeem their points to claim them.‍
• Lack of communication – reward programs that do not adequately communicate rewards and the value of program membership may see lower redemption rates and higher breakage.‍
• Rigid expiration policies – programs with short periods for points may see higher breakage rates as members may forget to redeem their points in time.‍
• Infrequent purchases – industries with infrequent customers may see higher breakage rates as customers are less likely to accumulate enough points to redeem rewards.‍
• Lack of integration with other programs – programs that do not integrate with other loyalty programs or payment methods may face difficulties in attracting and retaining members.
• ‍New consumer preferences – as consumer preferences evolve, loyalty programs that do not adapt may see higher breakage rates.

How to minimize loyalty breakage and maximize engagement?

To keep your program healthy, focus on "velocity" – getting points out of the account and into a reward as quickly as possible:

• Reward loyalty instantly: offer "Welcome Points" so new users can see the value of redemption immediately.
• Educate via explainer pages: create a clear landing page that demystifies how to earn and spend.
• Implement "rolling" expiration: instead of a fixed end-of-year purge, set points to expire only after X months of inactivity. This encourages a "maintenance" purchase to keep the balance alive.
• Omnichannel visibility: display the point balance and "eligible rewards" directly on the checkout page or in the mobile app header.
• Surprise & delight: occasionally grant "Bonus Points" with a short expiry to re-activate dormant members.