Expiry Rules

Point expiry rules automatically remove points from member balances after defined periods, managing program liability and motivating members to engage regularly with your program. Properly configured expiry rules balance financial prudence with member satisfaction.

Understanding Point Expiry

Point expiry is the automatic invalidation of points after a specified time period. When points expire, they are removed from the member’s balance and the corresponding liability is relieved from your financial statements.

Example Expiry: If your program has a 24-month expiry rule, points earned on January 1, 2024 would expire on January 1, 2026 if not redeemed. On the expiry date, those points are automatically deducted from the member’s balance.

Expiry Serves Two Purposes:

Financial: Limits indefinite liability accumulation by removing aged points that likely won’t be redeemed
Behavioral: Motivates members to stay engaged and redeem regularly rather than letting points accumulate indefinitely

Not All Programs Use Expiry. Some programs offer “points never expire” as a member benefit. This creates indefinite liability but may enhance member perception of program value and fairness.

Expiry Rule Types

Different expiry approaches serve different program needs:

Rolling Expiry expires points based on when they were earned:

Points earned January 2024 expire January 2026 (24-month rule)
Points earned February 2024 expire February 2026
Each point has its own expiry date based on earning date
Most common approach for loyalty programs

Fixed Expiry expires all points on specific calendar dates:

All points expire December 31 each year
Or points expire at fiscal year-end
All members’ points expire simultaneously regardless of earning date
Common in annual membership programs

Activity-Based Expiry expires points only if member is inactive:

Points expire after 12 months of no account activity
Any earning or redemption transaction resets the expiry clock
Encourages ongoing engagement without penalizing active members
Common in programs prioritizing engagement over liability management

Tiered Expiry varies expiry period by member class:

Bronze members: Points expire in 12 months
Silver members: Points expire in 24 months
Gold members: Points never expire
Creates aspirational tier benefit

Hybrid Expiry combines approaches:

Rolling 24-month expiry for standard earned points
Fixed annual expiry for promotional bonus points
Different currencies have different expiry rules

Configuring Expiry Rules

To configure point expiry in BigLedger:

Access Expiry Configuration. Navigate to the Membership Module and locate the point expiry setup. This is typically under Membership Setup > Point Expiry, Points Configuration > Expiry Rules, or similar menu path.

Initiate New Expiry Rule. Click “New” or “Create Expiry Rule” to open the configuration form.

Select Point Currency. Choose which point currency this expiry rule applies to. Different currencies can have different expiry rules—standard points might expire in 24 months while promotional points expire in 6 months.

Define Expiry Type. Select the expiry approach:

Rolling expiry based on earning date
Fixed expiry on calendar date
Activity-based expiry
Member class-based expiry

Set Expiry Period. For rolling expiry, define the time period:

Months: Points expire X months after earning (e.g., 24 months)
Days: Points expire X days after earning (e.g., 730 days)
Most programs use months for easier member communication

Set Fixed Expiry Date. For fixed expiry, specify:

Month and day when points expire (e.g., December 31)
Whether to include current year or only future years
Behavior for points earned after the annual expiry date

Configure Activity Grace Period. For activity-based expiry:

Define inactivity period (e.g., 12 months of no transactions)
Specify what counts as activity (earning only, or earning and redemption)
Set warning period before expiry

Define Member Class Variations. If expiry varies by tier:

Specify expiry period for each member class
Or designate certain classes as “no expiry”
Tier-based expiry creates tangible tier value

Set Warning Period. Configure when to notify members of approaching expiry:

30 days before expiry
60 days before expiry
Multiple warnings (60 days, 30 days, 7 days)

Configure Expiry Processing Schedule. Specify when expiry runs:

Daily batch process at specific time
Weekly process on specific day
Monthly process on specific date
Real-time as points reach expiry

Define Grace Period (Optional). Some programs allow grace period:

Points technically expire but remain redeemable for 30 additional days
Provides buffer for members who narrowly miss redemption
Reduces negative member reactions

Set Expiry Transaction Description. Define how expiry appears in member history:

“Points expired per program rules”
“24-month expiry - Earned January 2024”
Clear description helps members understand what happened

Save the Expiry Rule. Click “Save” to activate the rule. It will apply based on your configured schedule.

Expiry Calculation Methods

How systems calculate when points expire:

Earning Date Basis. Most common method:

Track the date each point is earned
Apply expiry period to each earning transaction
Points earned January 15 expire January 15 two years later (24-month rule)
Requires tracking earning date for each point or batch of points

Anniversary Date Basis. Alternative method:

Points expire on member’s join anniversary
All points earned in a membership year expire together
Simpler tracking, less precise than earning date
Common in annual membership programs

Calendar Month Basis. Simplified approach:

Points earned anytime in January expire end of January two years later
Grouped expiry by earning month rather than exact date
Easier administration at cost of some precision

FIFO (First In, First Out). For redemption ordering:

Oldest points are redeemed first
Ensures expiring points are used before newer points
Prevents members from inadvertently letting old points expire while using new points

Expiry Period Selection

Choosing the right expiry period balances multiple factors:

Common Expiry Periods:

12 Months: Aggressive expiry, drives frequent engagement, suitable for high-frequency businesses
24 Months: Standard expiry, balances liability management with member satisfaction
36 Months: Generous expiry, allows time for significant point accumulation
No Expiry: Maximum member satisfaction, requires other liability management

Factors in Selection:

Purchase Frequency: Match expiry to how often members typically transact
Point Earning Rate: Slower earning may warrant longer expiry to allow accumulation
Average Time to Redemption: Most members should be able to accumulate and redeem before expiry
Liability Concerns: Shorter expiry provides tighter liability management
Competitive Positioning: What expiry periods do competitors offer?
Member Expectations: Member expectations vary by industry and market

Industry Benchmarks:

Airlines: 12-24 months (or activity-based)
Credit cards: Points never expire (or very long periods)
Retail loyalty: 12-36 months
Restaurant programs: 12-24 months
Hotel programs: 12-24 months (or activity-based)

Member Communication About Expiry

Clear communication prevents negative member reactions:

At Enrollment. Inform members of expiry rules upfront:

Include expiry terms in program terms and conditions
Explain expiry period in welcome materials
Set expectations from the beginning

In Ongoing Communications. Regularly remind members:

Include expiry information in member statements
Display “points expiring soon” in member portals
Send periodic reminders even when expiry isn’t imminent

Expiry Warnings. Proactively notify members of approaching expiry:

Email: “You have 2,500 points expiring on March 15”
SMS: “Use your points soon! 2,500 expire in 30 days”
App notifications: “Points expiring soon - redeem now”
Include redemption suggestions in warning messages

Post-Expiry Communication. After points expire:

Send confirmation: “5,000 points expired on March 15 per program rules”
Explain why expiry occurred
Remind of current balance and when it expires
Encourage continued engagement

Redemption Prompts. Encourage redemption before expiry:

“You have points expiring soon - redeem for these rewards”
Feature redemption options in expiry warning messages
Make redemption process prominent and easy

Expiry Warning Systems

Automated warnings help members avoid unwanted expiry:

Multi-Stage Warnings. Send warnings at multiple intervals:

90 days before expiry: Informational reminder
60 days before expiry: Actionable warning with redemption suggestions
30 days before expiry: Urgent warning
7 days before expiry: Final warning
1 day before expiry: Last-chance alert

Personalized Warning Content. Customize warnings based on:

Amount of points expiring (larger amounts warrant more urgent communication)
Member tier (VIP members get personal outreach)
Member activity level (inactive members need more encouragement)
Available redemption options (suggest specific rewards member can afford)

Multi-Channel Warnings. Use various communication channels:

Email for detailed expiry information
SMS for urgent, short warnings
Mobile app push notifications for immediate alerts
In-app banners when member logs in
Display warnings during POS transactions

Warning Effectiveness Metrics. Track:

What percentage of warned members redeem before expiry
Which warning timing is most effective
Which communication channels drive action
Whether multiple warnings increase redemption

Managing Expiry Exceptions

Most programs need expiry exception handling:

Extension Requests. Members may request expiry extensions:

Customer service representatives review requests
Common approval reasons: illness, travel, system issues
Document approval criteria consistently
Track extensions for audit purposes

Bulk Extensions. Temporarily suspend expiry for situations like:

Pandemic or natural disaster affecting member ability to redeem
System outages preventing redemption
Program changes requiring transition period
Goodwill gesture after negative events

Reversal of Expired Points. Occasionally restore expired points:

Member appeals expiry within reasonable time
Expiry occurred due to system error
Customer service resolution of complaint
Requires proper authorization and audit trail

Tier-Based Grace Periods. Provide automatic extensions for valued members:

VIP members get automatic 90-day grace period
Long-tenure members get extended expiry
High-volume members get preferential treatment

Documentation Required. For exception handling:

Record reason for extension/restoration
Document authorization
Maintain audit trail of all expiry exceptions
Review exception patterns to identify policy issues

Accounting for Point Expiry

Expiry has specific accounting impacts:

Liability Relief. When points expire:

Debit (decrease) point liability account
Credit (increase) breakage income or other income account
Amount equals estimated value of expired points

Journal Entry Example:

Transaction: 5,000 points expire (valued at $50)

Debit:  Loyalty Points Liability    $50.00
Credit: Loyalty Breakage Income     $50.00

Note: 5,000 points at estimated value of $0.01 per point

Financial Statement Impact:

Point liability decreases (balance sheet)
Income increases through breakage recognition (income statement)
Net effect: Improvement to financial position

Breakage Recognition Timing. Two approaches:

Expiry-Based: Recognize breakage income only when points actually expire
Actuarial: Estimate breakage and recognize proportionally over point life

Tax Considerations. Consult tax advisors on:

Tax treatment of breakage income
Whether expiry creates taxable events
Reporting requirements for expired points

Audit Trail. Maintain records of:

Member ID and transaction details for each expiry
Points expired and estimated value
Date and time of expiry processing
Batch processing logs for expiry runs

Expiry Performance Monitoring

Track expiry metrics to manage program health:

Expiry Rate. Percentage of earned points that expire unredeemed:

Total points expired ÷ total points earned
Industry benchmarks typically 10-30%
High expiry rates may indicate issues with redemption accessibility or value perception

Value of Expired Points. Financial value of expiry activity:

Total dollar value of points expired per period
Feeds breakage income recognition
Helps forecast future liability relief

Member Impact. How many members experience expiry:

Percentage of active members with expiring points
Concentration of expiry (many small expiries vs. few large)
Member sentiment after expiry events

Warning Effectiveness. How well warnings prevent unwanted expiry:

Redemption rate after expiry warnings
Optimal warning timing and frequency
Channel effectiveness for driving redemption

Expiry Patterns. Identify trends:

Seasonal patterns in expiry
Correlation between expiry and member characteristics
Whether certain earning methods have higher expiry rates

Member Complaints. Monitor expiry-related complaints:

Volume of extension requests
Common reasons for appeals
Sentiment in customer service interactions
Whether expiry is causing member attrition

Activity-Based Expiry Implementation

Special considerations for activity-based expiry:

Define “Activity” Clearly. Specify what resets the expiry clock:

Only point earning transactions
Both earning and redemption
Account logins or portal access
Email engagement or communication responses

Grace Period for Inactivity. Most programs allow significant grace:

12-18 months of inactivity before expiry
Longer than rolling expiry for same program
Balances liability management with member retention

Reactivation Opportunities. Before expiring due to inactivity:

Send reactivation offers (“Earn 100 bonus points with any purchase”)
Provide easy ways to reset the clock (simple online activity)
Explain how to prevent expiry through activity

Member Communication. Clearly explain activity requirements:

“Points remain active as long as you earn or redeem at least once every 12 months”
“Keep your account active with any transaction to prevent expiry”
Show last activity date in member portals

Implementation Complexity. Activity-based expiry requires:

Tracking last activity date per member
Monitoring for inactivity
Warning system before expiry
Processing expiry for inactive accounts only

Expiry and Member Satisfaction

Balance liability management with member perception:

Expiry is Often Unpopular. Members generally dislike expiry:

Perceive it as taking away earned value
Feel penalized for not redeeming frequently enough
May view it as unfair program practice

Mitigating Negative Perception:

Set reasonable expiry periods (24+ months for most programs)
Provide generous warnings before expiry
Make redemption convenient and valuable
Offer exceptions for reasonable circumstances
Consider activity-based expiry as member-friendly alternative

Competitive Positioning. Consider competitor practices:

If competitors offer “no expiry,” yours may seem less attractive
If your expiry is much shorter than competitors, justify with other benefits
Industry norms set member expectations

“Points Never Expire” Alternative. Some programs skip expiry:

Maximum member satisfaction and fairness perception
Requires other liability management strategies
May be sustainable for programs with high redemption rates
Works well for credit card and coalition programs

Test Member Reaction. Before implementing expiry:

Survey members on acceptable expiry periods
Test expiry communication effectiveness
Prepare customer service for inquiries
Have clear policy for addressing concerns

Best Practices for Expiry Configuration

Choose Member-Friendly Periods. Set expiry periods generous enough that most active members won’t experience unwanted expiry. 24 months is a common standard that balances needs.

Warn Early and Often. Multiple warnings at various intervals give members ample opportunity to redeem before expiry. Start warnings 90+ days before expiry.

Make Redemption Easy. Ensure redemption is convenient before enforcing expiry. If redemption is difficult, expiry seems punitive.

Provide Clear Communication. Expiry terms should be transparent from enrollment through ongoing membership. No surprises.

Offer Reasonable Exceptions. Have a clear, fair policy for expiry extensions when circumstances warrant. Document criteria and authorizations.

Monitor Impact. Track expiry rates, member complaints, and effectiveness of warnings. Adjust policy if expiry is causing program issues.

Consider Activity-Based. Activity-based expiry is often more member-friendly than rolling expiry, especially for programs with variable purchase frequency.

Test Thoroughly. Before launching expiry rules, test extensively:

Verify expiry calculations are correct
Confirm warnings send as scheduled
Test accounting integration
Process test expiry batches

Document Completely. Maintain documentation of expiry rules, processing schedules, exception policies, and member communication standards.

Coordinate with Finance. Ensure accounting team understands expiry timing, breakage recognition, and financial statement impact.

Point expiry is a powerful tool for liability management and member engagement. Configure it thoughtfully to achieve financial objectives while maintaining member satisfaction and program attractiveness.