Microsoft to replace Xbox Live reward points program

Microsoft plans to transition from Microsoft Points to real-world currency when its new Xbox 360 dashboard rolls out to all users, and the company will change the structure of its Xbox Live Rewards program because of the conversion.

Currently, Xbox Live users registered for the program can earn Microsoft Points, but the company will cease offering the digital currency as a reward on August 1. Users who still have pending Microsoft Point deposits through the program will receive their remaining balance on August 7. Microsoft announced the move in a statement released on the Xbox Live Rewards website and via email to program members.

In place of Microsoft Point rewards, a new system will provide users with "even better" prizes, effective September 1. Microsoft described the transition in its statement as follows:

With all these changes, it’s become necessary for us to evolve the way we reward you. Starting August 1, 2013, you will not be able to earn Microsoft Points through Xbox Live Rewards any longer. Not to worry, though! Since this currency change is impacting the structure of the program, we’re taking the opportunity to make Xbox Live Rewards even better. You’ll continue to get rewarded for doing the things you love on Xbox Live – just not with Microsoft Points. So come back to on September 1, 2013 for the full scoop. You can also follow us at @XboxLiveRewards on Twitter for the latest updates.

question-and-answer page addressing the change states users will continue to be rewarded for renewing their Xbox Live Gold memberships and making their first purchase on the Xbox Live Marketplace, though exact rewards are not stated.

Source: Xbox Live Rewards | Image via Microsoft

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The thing with the points is that they aren't money and therefore there are no tax implications. Whereas, if they start giving away money, there are things, like taxes, that need to be considered.
I know many people hate the points, but they have a purpose and place. Furthermore, there were/are many times you could find the points on sale getting them even cheaper than "face" value.
Make no mistake, going to a currency system is actually a win for Microsoft, and not much of a gain for the consumer.

AWilliams87 said,
Wonder how that will change Bing's Xbox points reward system. It basically gives me a free movie to watch per month.

I was just wondering that too.

BajiRav said,
Likely will turn into the Store balance system that they have for WP8.

Oh okay. Just my Xbox also and the points turned into actual money, so that's cool.

Lately, I've been using my bing rewards points for the $5 amazon gift cards instead of microsoft points. I was able to get my gold shield for my motorcycle helmet for free ($45 for the regular price) because I saved up my reward points and cashed in 9x$5 cards. There's some nice stuff you can get with that.