What Are Reward Credits? Types, Examples, and How Do They Work

Niti

• 2 min read

Brands today are under pressure to not just acquire customers, but to retain them and maximize their lifetime value (LTV). One proven way to do this is through reward credits — a modern twist on traditional loyalty programs.

Unlike discounts that end with a single purchase, reward credits give shoppers an ongoing reason to return. For brands, they drive repeat revenue and customer stickiness. For shoppers, they create a sense of extra value and exclusivity.

In this blog, we’ll break down:

  • What reward credits are
  • How they work
  • Types of reward credits programs
  • Why they drive retention
  • Real-world examples

What Are Reward Credits?

Reward credits are a virtual balance of benefits that customers earn when they interact with your brand — whether through purchases, referrals, or even engagement.

For example:

  • Spend ₹1,000 → Earn ₹50 in credits
  • Refer a friend → Get 200 credits
  • Write a product review → Unlock 100 credits

Unlike loyalty points, reward credits are designed to feel closer to real value, often functioning like store credit or digital currency that can be redeemed for discounts, perks, or exclusive products.

Think of them as a running tab of rewards that grows as customers interact with your brand.

How Do Reward Credits Work?

The mechanics are simple:

  1. Earning Credits
    • Shopping (e.g., ₹1,000 = 50 credits)
    • Referrals (bonus credits for inviting friends)
    • Milestones (extra credits after 5 purchases)
    • Engagement (credits for app usage, reviews, or social shares)
  2. Tracking Balance
    • Credits are stored in a digital wallet, visible in the app or customer account.
  3. Redeeming Credits
    • Discounts at checkout (e.g., ₹100 off for 500 credits)
    • Free products (exchange credits for curated items)
    • Exclusive access (unlock early drops or premium experiences)
    • Partner perks (convert credits to other brand benefits)
  4. Expiry or Tiers (optional)
    • Some programs use expiry dates to create urgency.
    • Others build tiered structures (Silver, Gold, Platinum) for high-value customers.

Types of Reward Credit Programs

Here are some popular structures:

  1. Cashback-Style Credits Customers earn credits that act like digital cash, redeemable on future purchases.
  2. Tiered RewardsCustomers progress through levels — higher tiers mean faster credit accumulation and exclusive perks.
  3. Partner-Linked CreditsBrands collaborate, letting customers earn or redeem credits across ecosystems.
  4. Gamified CreditsRewards for completing actions like streaks, challenges, or seasonal campaigns.
  5. Paid Membership CreditsSubscription-based models where members earn extra credits or get an annual bonus.

Why Reward Credits Work for Retention

Reward credits are effective because they tap into psychology and habit-building:

  • Positive reinforcement: Every action earns a reward.
  • Loss aversion: Expiring credits nudge customers to return before losing value.
  • Progress motivation: Seeing credits grow encourages repeat purchases.
  • Status signaling: Tiers and milestones create aspirational goals.
  • Habit loops: Regular checking of balances turns into repeat behavior.

From a business standpoint, reward credits increase purchase frequency and reduce churn. Acquiring new customers costs up to 25x more than retaining existing ones — credits keep them coming back.

Real-World Examples

  1. Nykaa Prize Credits Nykaa gives customers reward credits on every order, redeemable as future discounts. Higher spenders unlock faster earnings and exclusive perks.
  2. Amazon Pay Balance While not positioned as loyalty, Amazon often credits users with cashback in the form of “Pay Balance,” usable across the ecosystem.
  3. Cult.fit Cash Cult.fit rewards members with credits for app activity, challenges, and renewals. These can be redeemed for classes, merch, or partner services.
  4. Swiggy One Credits Frequent users get redeemable credits for referrals or special promotions, creating stickiness in food ordering behavior.

Final Thoughts

Reward credits aren’t just about discounts — they’re about building a habit loop that keeps customers coming back. Done right, they transform one-time shoppers into lifelong brand advocates.