Is it worth being loyal?
That may seems a strange question to ask on a site that shows the benefits of loyalty and frequent flyer programs. However companies 'reward' loyalty with benefits that cost them money. So you need to know what's in it for them. Despite the extra costs, most companies see loyalty as a significant driver of profit. The easy explanation is that they want your repeat business. But, it is often more manipulative than that. Not only do they want you to keep coming back, they want you to pay more, and buy more items than you planned. How many times have you seen a better or cheaper offer elsewhere, but stuck to one brand because of the hope you'll get something for free through the loyalty program? Another technique is to lure you to spend more than you planned and in return offer you a bonus for doing so.

How loyalty works against you
The aim of the businesses offering loyalty rewards is to change your behaviour. It is quite difficult to ignore the benefits of staying loyal to one brand when they dangle rewards in front of you. It also gives you an excuse to spend more when you probably should not: 'if I just buy this item I'll be closer to getting a reward'. This can cause you to pay extra for the same items, or spend more on other items you may not have bought otherwise. Ultimately, you will end up paying more than you budgeted and the additional amount rarely makes up for what you received back in benefits. Unconvinced? Here are two examples:

1. Coles or Woolworth offer 1,000 bonus points if you spend a certain amount in a short period of time. The amount you have to spend is often calculated above your average amount per week, and is rarely valid for more than 10 days. In a future article, we will show you how you can tweak an offer like this so in the long run it costs you know no more. Always keep in mind points are not like cash as you have to redeem the bonus with the company that provided them (rather than spending it anywhere you wish) and the number will often sound large, but will be valued much lower when you translate them back into a dollar value. One thousand Flybuys or Woolworths Rewards points may sound like a lot, but their value is in the order of $5. Unless the offer required you to spend less than an additional $5 to earn those 1000 bonus points, you've received less value in bonus points than the extra you paid.

2. Flying on Qantas when Virgin has a far cheaper flight and is offering a similar service. Many times frequent flyers get drawn in by the lure of future rewards and chasing frequent flyer points. However, a cheaper flight with a comparable airline may be available. That difference in the airfare is extra money you've spent and since frequent flyer points are available on both Qantas and Virgin, there is not much to gain by paying more.

Being disloyal - to a degree
If you are close to a specific reward or status level, sometimes spending that little extra can be worth it, but throughout a typical a year, your best strategy is to be poly-loyal. In other words, being a little bit disloyal can save you money in the long run. This is not to suggest you abandon loyalty programs altogether, instead you just pick the best offer and collect the points associated with that offer.

Unless you are very brand loyal due to other factors such as quality or convenience, it works in your favour to be a disloyal and shop elsewhere with another business that has a competing loyalty program. This will allow you to get the best deal and you'll be less swayed to pay more for one particular offering, because your benefits flow through regardless of the option you choose.

It is also important not to spread your points out too thinly as you may not earn enough points in any program for a reward. Generally the best approach is to be both a member of Coles and Woolworths if you shop at either, join a centralised hotel reward program that is not tied to one hotel group, and to join the Qantas, Virgin and Singapore Airlines frequent flyer programs to give you the most options for earning and redeeming flights (more on that later).

Below are the best options to spread your loyalty around. It will take longer to gain a benefit initially, but over time it will even out and you'll receive the same benefits, plus sometimes you'll get more benefits sooner (see supermarkets). As mentioned above, an exception may be useful if you are on a cusp of some major benefit and you need the points to gain a significant reward.

We have already covered the basics of which frequent flyer program should you join. Due to the ability to transfer points between Virgin's Velocity and Singapore Airlines Krisflyer programs, joining those two and Qantas will see you covered for over 60 airlines, with all points all pooling ultimately into just two of the programs.

One additional benefit people often overlook with airline frequent flyer program is that having points in different competing programs can improve the flexibility when redeeming rewards. If two airlines are flying the same routes, providing you have enough points, getting a desired itinerary is more likely. Let's say you want to fly from Melbourne to Sydney and being a loyal flyer on Qantas, you find out you can fly out of Melbourne using points, but there is no luck on the return sector from Sydney. Then you look at Virgin and find they have availability for the return sector. In this case, using both programs can get your desired reward. In reality, it can be a bit more complex that this example, but it shows how having a good pool of points in different programs can improve the chances of a redeeming a reward when you want.

An interesting quirk with the supermarket loyalty programs is that your historical spend is often used to determine the levels at which a targeted bonus offer will be applied. For example, if you spend $250 a week at Coles, you will might be targeted with an offer requiring you to spend more to receive a one-off bonus. It may be something in the vicinity of $300 within the next week to earn 1,000 bonus points. At the same time, someone who averages $50 a week may get an offer needing them to spend $60 to earn the same 1,000 points. Plenty of online forums show gripes about this issue: how a friend or relative received the same bonus offer but they had to spend less to get it.

In a twist, this shows how your supermarket loyalty can work against you. It's much easier for the lower spender to increase their shopping by $10 to reach $60 than the $250 spender to hit $300. If you are spreading your grocery shopping between Coles and Woolworths, it makes it possible to switch to one supermarket's bonus offer in a particular week and hit their target without actually having to spend more. On a normal week-by-week basis, this approach also allows you to take advantage of whatever supermarket is offering the best current deals for you.

In addition, if you reduce your shopping with a particular supermarket brand, you'll often get some kind of inducement to return back to your regular shopping at their stores. Since your average spend also drops due to you shopping elsewhere, the offer will probably be lower than if you stayed loyal.

Booking hotels
Brand-specific hotel rewards programs like Hilton Honors or World of Hyatt are where people can end up outlaying more for a stay because of the possibility of loyalty perks. If you travel a lot and have a preference for a certain hotel group, the loyalty programs can work to your advantage. However, this would only be the case for those travellers who have a chance of getting to one of the middle-high status tiers (and require spending $5,000-$10,000 a year on rooms).

In our guide Which hotel loyalty program should you join?, we show the how many nights you need to stay in a 12 month window before you get a free night. It will require a substantial sum and commitment to the one hotel group. Plus redemptions can only be made at the hotels that are part of the program, and even that assumes they have reward availably for the days you want to stay. In another case where being slightly disloyal helps, by using the hotel loyalty triple-dipping technique via, you can get more benefits including cash back plus flexibility to earn and redeem free nights across over 250,000 different hotels. This approach can see you earning rewards at 2-4 times the rate of the hotels' own loyalty programs.