The Points Tax You’re Already Paying (And How to Zero It Out)
Your business isn’t just spending, it’s paying a hidden Points Tax. Invisible on your P&L, untracked by your accountant, undisclosed by banks, it silently drains value whenever loyalty points are mismanaged, under-earned, or redeemed below their true worth.
If You Only Had 60 Seconds to Read This Article
| Click Here 🤏🏻
Most businesses are unknowingly paying a Points Tax, a silent, invisible drain on their spending. It doesn’t appear on financial statements or come from the IRS - it’s imposed by banks and loyalty programs, fueled by inaction and misaligned strategy. Every time you swipe the wrong card, redeem points below value, or spread spend across too many programs, you’re paying this tax in lost value, not cash. For small and medium sized businesses, it often amounts to 6-12% of annual card spend, quietly siphoning thousands - or hundreds of thousands - of dollars each year.
The Points Tax comes in five forms: Under-Earning, when the wrong card is used for a category; Redemption Penalty, when points are redeemed below 1.8¢ value; Breakage, from expired or orphaned points; Devaluation Drag, when programs quietly raise redemption costs; and Fragmentation, when points are spread across too many programs. Each layer erodes the potential return on spend and compounds silently over time, making loyalty a hidden liability rather than an asset.
Eliminating the Points Tax requires accountability and structure. Appoint a Fractional Chief Points Officer or centralize oversight using a platform like First Officer. Map every category to the optimal earning card, enforce a redemption floor of at least 1.8¢ per point, consolidate programs, kill orphan points, and establish a quarterly transfer and redemption strategy. Discipline in execution converts idle points into measurable value, turning potential losses into actual returns.
Real-world businesses prove the impact: a 12-person HVAC company cut its Points Tax by 87%, a boutique law firm replaced $42K of cash travel with points in six months, and a $3.1M eCommerce business recovered $46K-$58K in annual value simply by optimizing strategy. The lesson is clear: you don’t need more spend, new cards, or elite status - you need process, ownership, and discipline. Eliminating the Points Tax unlocks 5-20% ROI on money already spent and turns invisible losses into tangible wins.
Everything else you need to know is just below 👇🏻
🎞️: Powered by NotebookLM @ UpNonStop
There’s a tax every business pays without voting on it, budgeting for it, or even realizing it exists. It doesn’t show up on your balance sheet. It doesn’t come from the IRS. It isn’t tied to revenue or payroll or corporate structure.
It’s imposed by the banks. Collected by the loyalty programs. Funded by your ignorance.
It’s the Points Tax ... the silent penalty business owners pay when they earn the wrong way, redeem the wrong way, or fail to manage the loyalty value they’re generating every single day.
And here’s the part nobody tells you: You’re already paying it. You just don’t know how much.
This is the playbook to stop paying the Points Tax forever.
What the Points Tax Really Is
Every business pays a tax they don’t see. It doesn’t appear on a balance sheet, it isn’t deductible, it doesn’t exist in the financial statements you obsess over each quarter. Yet it drains real value from your company every single day.
This is the Points Tax - the invisible, automatic penalty imposed by loyalty programs, banks, and your own lack of strategic oversight. Unlike federal taxes, there’s no IRS letter to wake you up. Instead, it appears silently, invisibly, and consistently in the background of every transaction.
Every time a business swipes the wrong card, fails to track points properly, redeems below potential, or fragments spend across too many programs, it is paying this tax. Unlike the taxes you prepare for, the Points Tax is not just unavoidable by law - it’s unavoidable by inaction.
And what makes it dangerous is that it is paid in value, not dollars. You never physically see the money leave your account. Instead, it disappears into the ether of under-optimized loyalty. It might show up as a redemption at 1¢ per point, points that expire in an obscure program, or miles sitting idle in a forgotten account. It is the cost of misalignment, the penalty for fragmentation, and the hidden line item that quietly erodes your bottom line.
The Layers of the Points Tax
1. Under-Earning: The Tax the Banks Love
The first layer of the Points Tax is under-earning, which happens when your business fails to use the right card for the right category.
Most businesses default to using one or two cards across all spend. It’s simple. It’s convenient. And it’s costing you 60-80% of potential points.
For example:
- $400,000 in digital advertising at 1x instead of 4x → 1.2 million points lost
- $600,000 in vendor payments at 1x instead of 2-3x → 600,000-1.2 million points lost
- $150,000 in travel on a flat-rate card → another 300,000 points gone
This isn’t theory. It’s arithmetic.
The solution is simple: map every category to the card that yields the highest multiplier - no exceptions.
2. Redemption Penalty: Paying for Laziness
The second layer is the Redemption Penalty, the most immediate and costly Points Tax.
Redeeming points at 1¢ per point, or using Pay-With-Points portals without strategy, is equivalent to paying an extra 40-60% tax on every redemption.
This happens when businesses:
- Redeem hotel stays at portal rates instead of transferring to partners
- Let assistants book cash flights while points sit idle
- Ignore bonus periods or higher-value redemptions
The fix is simple: never redeem unless the value is ≥1.8¢ per point. Period.
3. Breakage: The Tax of Inaction
Breakage is the graveyard of points: free nights that expire, balances that never reach threshold, or miles you’ll never use.
For small and medium sized businesses managing multiple loyalty programs across employees, breakage isn’t small. Missing one $25,000 airline redemption due to forgotten points is painful. Multiply that across programs and employees, and the loss is massive.
How to fix it:
- Centralize all programs in a dashboard
- Eliminate fringe programs
- Sweep orphan balances through transfers
- Set quarterly expiration checks
Points you can’t use are liabilities, not assets. Zeroing this out converts idle currency into active capital.
4. Devaluation Drag: The Hidden Inflation
Airlines and hotels quietly devalue points. Award flights cost more. Hotel stays jump up. Transfer ratios shift.
This is inflation you don’t see and can’t negotiate. Businesses holding points for too long pay 15-30% in effective loss over 24 months.
UpNonStop Solution:
- Earn fast
- Redeem fast
- Transfer strategically
- Never hoard points
- Treat loyalty balances like perishable inventory
5. Fragmentation: The Tax Nobody Realizes
Spreading spend across 9+ programs instead of focusing on 2-3 ecosystems creates fragmentation.
The result:
- Inability to reach premium cabin seats
- Missing long-haul redemptions
- Lost elite perks
- Wasted transfer bonuses
Fix: consolidate. Pick two primary programs. Everything else dies. Instant reduction in Points Tax.
The Cumulative Cost
When combined, these five layers can cost an SMB 6-12% of total spend annually.
- $1M spend → $60K-$120K lost
- $5M spend → $300K-$600K lost
This is money leaving your business silently every year. Unlike federal taxes, it is dynamic, compounding, and invisible.
Zeroing Out the Points Tax: SMB Playbook
Assign Ownership
The Points Tax exists because no one owns loyalty. CEOs own revenue, CFOs own cash - someone must own points. Appoint a CPO internally or use First Officer to centralize oversight.
Build a Category Map
Assign each spend category to the card that maximizes points:
- Ads → highest multiplier
- Travel → strategic transfer ecosystem
- SaaS, vendors, fuel → bonus categories
Set a Redemption Floor
Only redeem above 1.8¢ per point. This eliminates the majority of the Redemption Penalty.
Quarterly Transfer Strategy
Review balances, map upcoming travel, and leverage partner bonuses. Crush devaluation and fragmentation simultaneously.
Eliminate Orphan Points
Sweep, transfer, or close accounts with unusable balances. Idle points are liabilities.
Redemption Pipeline
Schedule a system for:
- Earn forecast (next 90 days)
- Redemption targets
- Bonus periods and conversion windows
- Execution timing
- Reconciliation
This structured approach eliminates 90%+ of the Points Tax within 12 months.
Case Studies: Real SMB Impact
12-Person HVAC Business
- Spend: $920K
- Original Points Tax: ~$62K
- Fix: category mapping + consolidation into 2 ecosystems
- Result: RoS 7.4%, Points Tax reduced by 87%
Boutique Law Firm (18 Staff)
- Spend: $1.6M
- Original Points Tax: $110K
- Fix: collapsed 5 programs into 2, quarterly transfer strategy
- Result: $42K cash travel replaced by points in 6 months
eCommerce Brand
- Spend: $3.1M
- Original Points Tax: millions of points lost
- Fix: category-specific card structure + travel pipeline
- Result: 2.3M points → $46K-$58K value
Final Approach
You don’t need new cards. You don’t need more spend. You don’t need elite status.
You need to stop paying a tax that never should have existed.
Zero out the Points Tax and immediately unlock 5-20% ROI on money you were already spending.
This is the real power of loyalty done right. Turn invisible losses into visible wins.
Ready to Bring UpNonStop as your Fractional CPO?
Get Started with a Free Earn-Optimization Assessment
Find out how much you could be earning and saving with UpNonStop.
Take the first step today, and let’s turn your business spending into premium travel with better value, and more time for what matters most.
Schedule Your Free Assessment Now 👇🏻
