Verizon Smart Rewards, and Dumb Rewards Programs You Should Skip

On July 24, Verizon rolls out a new program called Smart Rewards nationally. All customers who sign up as members—and, more important, who also enroll with Verizon Selects, a targeted advertising program—accumulate points for doing things like registering for paperless billing, autopaying their bills, and connecting a tablet to their account. Points are redeemable for things like retailer gift cards and perks such as the ability to "save up to 40% on brand name merchandise," according to Verizon.

By now, we should all be well aware that there's a tradeoff for membership in any such rewards program. Namely, that rewards come at the cost of giving up our data and privacy. Verizon's program, while not all that different from many others in the marketplace, stands out because it's especially invasive, allowing the bots to track members' locations, web browsing history, and app usage, among other things. What's more, the program's rewards, which mainly consist of discounts on merchandise rather than cash back or discounts on, I don't know, say, … your monthly Verizon bill! seem pretty lame.

So are the program's meager benefits worth the sacrifice? We asked a few rewards program experts for their thoughts on the topic, and on the state of rewards programs in general. Here are some key takeaways consumers should think about before absentmindedly signing up for any old rewards program.

Rewards programs aren't designed to reward you. "What's most important to understand is that these are marketing programs," said Jeff Blyskal, a senior editor at Consumer Reports who covers loyalty and reward programs. "They're just another form of advertising. They're designed to get you to spend more."

That happens either when you spend more often because you're a member, or you buy things you wouldn't have after they're brought to your attention—again because you're a member—or both.

Forget the garbage about getting only ads you want. To consumers accustomed to being spammed with irrelevant ads, the idea of receiving deals and offers specifically tailored to your interests sounds appealing. While some targeted advertising efforts indeed seem, well, on target, the reality is that once the door is open, "you're going to be pestered by all kinds of marketers," said Blyskal. "And you'll have no idea how exactly these companies and marketers got your information." The result is that you're likely to be bombarded by ads for products and services that you weren't shopping for, and/or that you have no interest in whatsoever. And the result of that is increased annoyance, increased spending on stuff you otherwise wouldn't have bought, or both.

"If you read Verizon's Privacy Policy Summary, that means you're subjecting yourself to telemarketing, e-mail marketing, postal mail marketing, and door-to-door calls," said Louis Ramirez, senior editor at dealnews. "You can opt out of some of these, but I'm sure it won't be an easy task." (A representative from Verizon reached out to clarify that Smart Rewards and Verizon Selections are entirely optional for customers, and "that it’s easy for customers to change their privacy choices at any time, and we encourage them to review and consider them on a regular basis.")

The rewards are rarely as rewarding as promised. "Every program has more than one catch," said Ramirez. Among the many catches are that the rewards are harder to use or less valuable than they seem at first glance, and that the "rewards" come in the form of discounts or "special offers" that are readily available elsewhere on the web, without the requirement of joining a rewards program. Verizon Smart Rewards, for instance, promises that members who are redeeming rewards points for discounts on merchandise are guaranteed that they'll get the lowest price available; if not, they're eligible for a refund of both the points used and the price difference on the item.

"They'll say they have the guaranteed lowest price, but it's up to you to shop around and make sure that's true," said Blyskal. "You've got to do the work. And we all know that you won't do the work. As soon as you trust a marketing company, you've lost half the battle."

It's not easy to correlate points to dollars. The best rewards programs give members easily understood discounts or cash back on items that they'd be buying anyway. When you get a CVS receipt giving a flat $5 off your next $25 purchase, that's a solid, comprehensible value. (There may be some other hassles involved, including the fact that the rewards may expire quickly, and that you're apt to wind up buying something you wouldn't have just because you're trying to use the coupon, but those are different issues.) Likewise, consumers like the simple value provided by supermarket rewards programs that give discounts on gas based on the amount spent in stores. (Though this structure can also result in customers buying stuff they didn't need in order to secure the discount.)

What's truly frustrating are the rewards of undeterminable value because there are so many unknowns involved. Is $5 off a $25 gift card at a retailer you think of as a ripoff worth jumping at? Is 40% off a blender that you had no inkling to buy before seeing the offer a good deal? As Ramirez pointed out, "Verizon states in their FAQ that every point you earn has no monetary value." Sometimes, the reward structure is so complicated that it may be best to not even bother wading into the fine print. "Sometimes there's a fee involved to be a member, or for some other part of the program," said Blyskal. "The benefits are hard to measure."

"Sorting the worthwhile from the worthless can require time, effort, and an exhaustive (and expensive) amount of trial and error," wrote Brad Wilson of BradsDeals.com in a post about rewards programs. "No one wants to toil away in a customer loyalty program that doesn't effectively reward their loyalty."

Working the system is harder than you think. "There are people out there who are really good at working these programs," said Blyskal. "They look at them like games, like bingo."

Being good at this game takes up a lot of time. In fact, some reformed extreme couponers (remember that craze?) have said that maximizing every little offer in order to snag every freebie or deal under the sun is, in fact, "a waste of time."

To figure out which of the thousands of rewards programs out there are worthy of your membership, it's necessary to look at oneself—and one's spending inclinations—in the mirror. If you're the type who wants to win at everything, and who therefore may be tempted to nonsensically spend hundreds of dollars in order to "win" $25 off, tons of rewards programs would absolutely love to have you as a member. Likewise, it may seem fun to regularly be presented with tempting random offers, but if you're the type who frequently bites on such deals, rewards programs and targeted advertising schemes could be bad news for your bank account.

The key is to make sure that you're working the rewards program, and not the other way around. Sign up for rewards programs when the benefits pay off in a clear and practical way, with rewards for things you would be buying even if the program didn't exist. Don't go overboard. Don't buy all sorts of things you don't need. Understand that with every rewards program, there's a tradeoff for every little reward you receive. And understand that however rewarding the programs seem to you, they're far more rewarding for the retailers that run them.