Shoppers' keychains and wallets are flush with "loyalty" passes that offer discounts and deals from all kinds of places -- department stores, airlines, grocery stores, pharmacies and gas stations.

But before signing up for yet another shopping pass, you might want to consider the risks and rewards.

Free Cookies

In this time of high food and fuel prices, debt burdens, declining home values and stagnant income, consumers are undoubtedly looking for bargains. If you can save a few bucks on cosmetics at CVS ( CVS) or get a second box of macaroni at Kroger ( KR) for half price by simply swiping a card, it's hard to justify resistance.

A company called Chockstone has even developed a technology called SingleSwipe to make rewards programs more convenient by linking them all up to one credit card, thus avoiding the need for dozens of plastic doodads.

Firms such as Chockstone collect, store and analyze all the details on what, when and where you buy. Such information allows companies to gain a competitive edge by identifying items you might want to buy. Stores offer coupons on their receipts to keep you coming back and spending more. Product makers offer discounts on those coupons to hook you onto their brands.

"Based on historical frequency and the kinds of things you purchase, we make an offer for you to make another purchase," says Chockstone CEO Jeff Lipp. Retailers and restaurants have had to "get really smart about how they make offers ... so they can make the right offer to the right customer at the right time."

Lipp cites an example: "If you come in tomorrow, we'll give you a free cookie."

Such incentives can help penny-pinching customers who frequent a certain restaurant or store. For instance, at Subway, one of Chockstone's clients, customers can earn one point for every dollar spent. Depending on what a customer eats, he can trade those points for drinks, chips, sandwiches, salads and, of course, cookies.

Knowing When to Swipe

Statistics show that consumers are more than willing to enroll in rewards programs. Whether they actually use the swipe cards is another story.

The average household has 12 loyalty passes, according to a study by Colloquy. However, only about 40% of those cards are actively used -- a figure the loyalty-program research firm characterized as "dismal." In some market segments, active participation is as low as 25%.

The lack of participation can seem startlingly silly, when using the rewards program can save tens or hundreds of dollars on a single transaction.

Xavier Drèze, an assistant professor of marketing at the University of Pennsylvania's Wharton School who has researched loyalty programs, uses airline miles as an example. Customers often belong to several frequent-flyer programs, he says, choosing flights by whichever is cheapest, even if the difference is only $5 or $10.

"But when you do that, you don't really accumulate points for one airline," says Drèze. "It takes you five years to get a free ticket."

Still, it's important to keep in mind that loyalty programs don't just offer rewards, they also try to incentivize more spending and consumption: Say you didn't need the extra box of macaroni or that flight to L.A. or that cookie. Companies will push the idea of savings and discounts, but their ultimate goal is to get you to stay in their store and spend more. It's important to separate the needs from the wants -- and the true bargains from the extra stuff you don't really need.

Privacy Breaches

Signing up for a rewards program also exposes personal information -- your name, address, phone number, bank account, credit-card number -- to a potential security breach. A look at Privacy Rights Clearinghouse's chronology of data breaches since January 2005 shows that those who want access to your personal information aren't always too careful with it.

The consumer-advocacy group has tracked more than 227 million record breaches over that period, several of which stemmed from the banks, credit-card companies, retailers and data providers that track and store your information.

Among those household names were Wal-Mart ( WMT), TJ Maxx stores, Gap, Albertsons ( SVU), Safeway ( SWY), RadioShack, CVS, Bank of America ( BAC), Commerce Bancorp, Wachovia, PNC, Wells Fargo, Visa ( V) and MasterCard ( MA).

There were also some lesser-known entities like ChoicePoint and CardSystems, which track and store troves of consumer data.

"It's a convenience, but you're really having a tradeoff that you could possibly have your credit card or debit card number breached," says Linda Sherry, director of national priorities at Consumer Action, an advocacy group. "It sounds overall much more 'Big Brother' than what we would ever feel is necessary for people."

In the end, loyalty programs might be a bust for both the store and the consumer, says Peter Fader, a marketing professor at Wharton who has also studied them. Fader says there are benefits only "at the margin" for consumers who save a dollar here and companies that convince consumers to spend another dollar there.

"The risks that companies run in trying to store all this data and the breaches and so forth are really high and the rewards aren't all that huge," he says. "Unless you have a whole lot of time on your hands or you really enjoy some kind of sport out of this, it's not really worth getting that hyped up about loyalty programs."

Loyalty Strategies

Savvy consumers who participate in loyalty programs are different from those who lose out on points in one important way: They remain loyal.

If you want to rack up points and gain the rewards, pick an airline, grocery store, pharmacy, gas station or fast-food chain that offers what you need at an affordable price. Then stick to it. If you don't consolidate purchases at one place, you can't rack up enough points to gain any benefits from the program.

On the other hand, if you're uncomfortable with letting companies track your shopping habits and personal information -- or too tempted by the offers of free cookies you don't need -- you might want to stay away from them altogether.

Sherry suggests a simpler alternative: "You should probably just find a place to shop that doesn't require you to scan a card for good, low prices."

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