A prevalent yet little understood phenomenon of customer reward programs is the use of finite reward expiration term. We develop a theoretical framework to investigate the economic rationale behind this phenomenon, and the tradeoff between short and long expiration terms. In our model, a monopolistic firm interacts with consumers over an infinite horizon, and simultaneously sets the expiration term along with the price and reward size. Consumers are heterogeneous in shopping probabilities and product valuations, and forward-looking in making purchase decisions. We find that a customer reward program with a finite expiration term can increase firm profits when (1) the valuation heterogeneity within the consumer population is intermediate, and (2) the shopping probabilities and valuations are negatively correlated among consumers. The optimal expiration term depends on both types of consumer heterogeneity. An optimal reward program never hurts frequent consumers, but can either hurt or benefit infrequent consumers. Similarly, its effect on social welfare is ambiguous. An empirical investigation of the top 100 US retailers provides directional support for several theoretical predictions. Several extensions of the main model confirm the robustness of these results. (This is joint work with Yacheng Sun at Tsinghua University)