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Congratulations! You spent $20,000 so you could get a $140 espresso machine.
Sound like a bad deal?
It is, yet it’s one Canadians sign up for almost every day. Rewards points, Aeroplan miles, More Rewards, Scene, Avion credit cards, the list goes on.
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The programs encourage spending by holding out hope for a reward in the end, and it seems they’ve been getting a worse and worse deal with every passing year.
My wife and I used to collect Air Miles, which is now Blue Rewards. As Air Miles, it wasn’t necessarily a bad deal: you got one Air Mile for every dollar spent at Safeway or Sobeys. An Air Mile for every $20 in gas at Shell. Miles for using the Air Miles credit card and miles for booking paid travel through the Air Miles website.
You got a reward for spending money you would have spent anyway. It paid for a few trips to Las Vegas for the Vegas Shoot archery tournament. I could live with that.
A few years ago, Safeway and Sobeys replaced Air Miles with Scene. Now, you only get Scene points when you buy products the stores, often with the support of the supplier, want to promote. It’s possible to spend $200 on groceries and not receive a single point.
For me, the value in Aeroplan wasn’t necessarily the points, though most of my miles were paid for by others. A return flight to Toronto would earn you 1,866 miles, 2,332 miles if you flew business class. The same flight in rewards miles would cost 16,000 miles at the cheapest and 36,000 or more for economy and 60,000 for business.
The real value to me was in the perks you’d receive when you passed certain milestones every year. When I began travelling extensively, if you flew 35,000 miles with Air Canada in a year, you got lounge access. A quiet place to await a flight with snacks and drinks.
Now, you have to fly 50,000 miles for lounge access. The 25,000 mile landmark, Prestige, isn’t worth the card it’s printed on.
At 100,000 miles a year, you are golden in the Air Canada hierarchy. Super Elite opened doors you didn’t know were there: concierge service at the airport, first in line for unrequested upgrades to business class, priority handling of checked baggage, first in line to board the plane, priority for requested upgrades to business class.
“I’m sorry, Mr. Taylor, but I will have to upgrade you to business,” the gate agent at Montreal’s Trudeau airport said once. “Aw, shucks. If I have to…”
After a year at Super Elite, I missed it when I didn’t qualify the next. I didn’t necessarily miss the 120,000 miles flying that got me there, however.
Rewards points can be useful, but you have to know how to use them. If you’re earning them on a credit card, don’t carry a balance. Interest charges quickly overtake the value of points.
When spending them, spend them on the things with the greatest return. Often, that’s travel. For example, right now with Avion, you can get a DeLonghi Stilosa espresso machine for 18,810 points. Or you can get a round-trip Air Canada ticket to Montreal for 35,000 points.
The espresso machine retails for $149.99. The airfare would be $594.
Based on earning at $1 per point, that’s 79 cents of value per point for the espresso machine (cost of machine divided by 18,810 and times 100) and $1.70 in value per point for the airfare (same calculation).
Cash back can also be a valuable reward, though it may seem deflating to get a few grocery spends for free instead of a winter holiday.
The math is different on different reward programs, no doubt by design to make it hard to compare.
Interestingly, some of the best deals through rewards programs are when you pay cash. For instance, a hotel and flight package we’re considering in Cabo San Lucas for a week this winter is $100 per person less expensive through Avion than through WestJet.
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