Starbucks expands rewards program by getting into the prepaid card business
When Starbucks announced last month that it would be changing its loyalty program to reward people more based on how much they spend than how often they visit the cafes, some regulars were upset.
Frugal customers who could previously get a free coffee or snack after 12 visits to Starbucks, even if they spent less than $2 each time, would now need to spend more to earn the equivalent amount of points under the new system.
But this week Starbucks revealed that consumers will soon be able to earn points for money they spend almost anywhere, making it easier to rack up free drinks.
The company announced Wednesday at its annual shareholder meeting that it is planning to introduce a reloadable prepaid card by the end of the year that customers could use to earn points anywhere Visa is accepted, instead of only earning those stars for purchases made at Starbucks.
The Starbucks Rewards Prepaid Card from Chase won't charge monthly service fees or fees for loading money on to the card, which are typically associated with prepaid cards. People will be able to apply for the card through the Starbucks mobile app or on Starbucks.com.
The card was announced as customers are bracing for changes to the main loyalty program. Starting April 12, Starbucks customers will earn two stars for every $1 spent at Starbucks, compared to the previous model of earning one star for every visit. It will take 125 stars for Gold status members to earn a free reward, compared to 12 stars under the old system. Existing loyalty members will see the number of stars in their accounts multiplied by 11 when the new program begins.
People who use their prepaid cards outside of Starbucks cafes would earn rewards points at a different rate than what they would earn inside the store, but the company hasn't shared details on what the rate would be. The model could be similar to what other brands do with their rewards cards, says Matt Schulz, senior industry analyst at CreditCards.com. For instance, some retailers award one point for every dollar spent outside of their brands but give people two or three times the points for dollars spent with that merchant.
By going with a prepaid card instead of a credit card, Starbucks may be trying to appeal to younger consumers who aren't interested in going into debt, Schulz says.
With the change, some people may have an easier time earning free coffee if they use the card at the grocery store or a bar or by paying monthly bills that they would have to pay anyway.