You are loaded with loyalty points. Not Qantas or Velocity or Flybuys, but a secret loyalty program bigger than all of the others combined. Seriously, your accumulated points over the last couple of years could have paid for an all expenses holiday to Bali for that cultural experience of a lifetime where you go to another country while still surrounded by Australians.

The run-of-the-mill loyalty club

Let’s take a look at your typical loyalty program. Every morning you stop by your favourite espresso machine and grab a flat white. While wondering how long it takes for the barista to get his moustache to look so good, he lovingly warms your milk, fills your cup and clips another tab off your loyalty card. You little ripper, only 17 more of these and I get a freebie. Or maybe because you are a local and bring your own pre-heated keep cup (yep, guilty as charged), you get your morning fix for $3.50 instead of $4.00.

This works, right?  This keeps you loyal and stops you from going to the espresso machine barely 10 metres away where customers wonder exactly how many coffees that barista has prepared to pay for his ink work. Why would you start clipping a new card when you are only 17 coffees away from a freebie?  Why pay $4.00 when you only need to pay $3.50?  Café owners are not in the Food and Beverage industry, they are drug peddlers. They know that you need your hit every single day and if they don’t give it to you, then someone else will. So they build a fence around their addicts by making it more attractive to come back to them, than to go anywhere else.

This is how almost all loyalty programs work. Coles don’t want you to shop at Woolies, so they give you a Fly Buys card to ensure you never stray. Woolies does the same. Qantas and Virgin are among dozens, possibly hundreds, of other businesses that do this too. It makes sense.

The loyalty club on acid

So picture this. You’re in line waiting to order your latte when the pbarista asks the person in front of you if they have a loyalty card, and you’re feeling pretty smug when they say they don’t. You’re kinda hoping that they hang around at the counter long enough to hear your order and find out that they could have saved a massive 50 cents if they were in the know. Instead, they get charged $3.50 because they DON’T have a loyalty card.

Now it is your turn and a little confused, you puff out your chest, drop your eyelids and in a voice just loud enough to carry to the waiting area, you order “Just the usual thanks Travis”, and flick him a glance of your Grinders Club Card.  So what does Travis do? He stings you $4.00!!  50 cents more than the newbie who not only doesn’t have a loyalty card, but doesn’t even know their drug dealer’s name! Of course, you protest and ask Trav why you should pay more for your coffee than someone who is not a regular, and Trav explains.  “You see bro”, (alarm bells ring – you are not related and he is not a Kiwi, so why he would use this word throws you off balance) “we got you. You are addicted and you’re going to keep coming back every day to get your fix. Yeah, you might consider going to another café, but think of the hassle. They will take at least a month to remember your name, you’ll have to fill in another loyalty card form and go onto their database. They’ll get your order wrong a few times and they’ll probably just make a crappy fern design in your foam instead of the Tyrion Lannister design I do for you. We’ve already got your business, so what’s in it for us to keep you happy?  Like it or lump it”.

Ooh man.  Now you’re angry.  Travis is sooooo off your Christmas card list this year.

I think you might know where I’m going with this.

What would you do?

Well? If this happened to you, what would you do? Would you dump Travis and take up with Liberty down the street? She of the multiple facial piercings?  Or would you keep going back for the reasons Travis outlined?

Forget hypotheticals, what DO you do? Think about it. Think about the other things you spend money on. It might not be a daily spend like your caffeine hit.  It might only be a monthly or annual expense. When was the last time you dumped a business that you were loyal to, in order to save a few bucks?

The Reverse Loyalty Program – the biggest of them all

Believe it or not, you are an active member of the reverse loyalty program outlined above. Businesses all over Australia favour new customers at the expense of their existing ones. Seriously. In many cases, new customers get the lowest prices and the sweetest perks, while those who have been loyal for years get ripped off blind. In my job, I see it every single day.

If you have a car insurance policy, home and contents cover, an electricity service, a mobile phone plan, an internet connection or a subscription of any kind that you have had for more than one year without reviewing it, then you are an entrenched member of the reverse loyalty program. These companies will promise the world to new customers, but at the same time will treat their existing customers like plebs.

And you know who takes the cake, right? Which industry has made an art form out of screwing over their current customers to offer the cheapest products to prospective ones?  I’ll give you a hint. Just four companies in this industry made a combined $30 billion profit in 2015. That is $30,000,000,000, or thirty thousand million dollars. Over a year, that’s $951 profit per second!

No, you don’t need another hint! Ok, just one more then. The title of the people that run these companies starts with a ‘B’ and rhymes with ‘wanker’. There.

The worst offenders

Now I don’t want to name names. But I will.

It’s easy because pretty much all the banks are guilty. I’ve got Big 4 clients who are all paying over 4.5% when their bank is currently offering new customers about half a percent lower on the advertised rate of exactly the same loan, and this is before I negotiate an even bigger discount for them. In most cases, I can get their owner occupied rate down to well under 4%, which is a savings of over $2,000 per year on a $300,000 loan.

Not only do new customers get a sharp rate of under 4% while old clients are stuck in the mid 4s, many banks now offer side perks such as cold hard cash in the form of “Refinance Rebates” and oodles of bonus points with Qantas and Velocity. NAB and Virgin have sweet deals with Velocity Frequent Flyers that give new home loan customers hundreds of thousands of Velocity points when they take out a new loan. So if you don’t mind flying at midnight in the cargo hold, this could buy you a return airfare to New York or Paris.

And what was the latest gift they gave their old clients? It rhymes with ‘Hero’ but starts with a Z.

Are you angry yet?

Then do something!! If you haven’t reviewed your home loan in the last 2 years, then you are paying way too much. You are gift wrapping bundles of your hard-earned cash and handing it over to your ever-thankful banking institution each and every month. Actually, that’s bullshit. They don’t even say thank you.

So here is a calculation I did for a client of mine this week. They have had a loan of $360,000 with a Big 4 bank for the past 3 years and their current rate is 4.70%. After consulting with their dashing and intelligent (yet overly humble) mortgage broker, they are now enjoying an interest rate of 3.89% and less fees.

This will save them about $170 per month, or $2,040 per year. If they keep making the old repayments to the loan, then they will shave 6 years off the life of the loan and with the magic of compound savings, will end up over $100,000 better off.

Yeah, refinancing can be a bit of a hassle. But is it a hassle that you would be willing to pay $100,000 to avoid? If the above makes you angry, call me. Seriously. Give me a call and I’ll lend you my ear. Tell me what you really think of your current bank. Don’t hold back. I’ll then have a look and see if you can vote with your feet or at the very least, negotiate a new better rate with your existing bank.

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