Tag Archives: credit card rewards

The Cost Of Loyalty Programs (Part II)

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I wanted to finish up our look at loyalty programs from two weeks ago.

All the details on a flight to Victoria are posted here – just scroll back to the last story in full. It’s a flight I’m on today, so it’s all broken down. If you’re hooked on the loyalty program of one of the airlines, you need to pay attention: On this $200 flight example, you have to pay EXTRA to get loyalty points. With Air Canada it’s an extra $23 to get half your miles or $44 more for 100%. With Westjet, pay $160 for the flight or $23 more for their Westjet dollars.

But look at their program: Westjet gives you 0.5% of your qualified spending in reward bucks. That’s one half of one percent! You’re paying $23 extra to get less than $1 in rewards. Yes, spend $23 to earn a buck! Tell me how that gets you ahead?

The other great example is from 7-11 and their new reward program. They’ve been doing a lot of TV ads, especially on CFL games. One of the ads is an offer to get a free small bottle of Coke for 1500 reward points.

OK, stop. I went to the store to check it out: The small Coke is 99 cents at 7-11, and pretty much every other retailer. So one dollar divided by 1500 reward points is 0.0007 cents. 7-11 rewards you shopping at less than ideal prices with seven one hundredth of a dollar. That’s to redeem your points. Flip it around to see what you earn: If it’s 2 AM and they’re close and open – buy what you need at 7-11. They’re convenient, good service, and open. But make sure what you’re buying isn’t costing you more than somewhere else because that seven one hundredth of a dollar isn’t making up for overpaying in the retail price!

Petro Points are $0.001 and Airmiles average $0.121. At most you’ll earn 1.5%. That’s the Westjet MasterCard, Aeroplan card, Costco MasterCard and others. It can also be as low as seven one hundredth of a dollar. Breaking news: I have NEVER had a millionaire tell me that their success was because of loyalty points!

Need I say more?

More Heads Up and Updates (Part II)

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According to the Washington Post, the on-line cost of hiring a hacker to break into someone’s e mail accounts is now down to $30. And hackers have an almost 100% success rate. But the majority of the buyers from these hackers are actually boyfriends, girlfriends, or spouses. The point is, that for your on-line banking, or anything on-line, you need a better password than most people have! Because the most common password is still 1234 and that’s nuts.

When is a deal actually a deal when we’re financing huge amounts of money? Here, and in the U.S., I keep seeing ads for houses and lots that are supposed to be incredible deals at 50% off. Off what? I’ve seen these ads in Ontario, and for resorts in BC. Lots that were originally listed at $500,000 are now half price. But that’s a phony figure, because the original price of the lots are just made up, and hoping that someone will pay it. What matters is what the house or the lot is appraised at TODAY, not what it’s listed for. Whether you’re selling your home, your car, or anything else, it’s the TODAY value, no what it was somewhere in the past! Careful with that, and don’t get trapped in the hype of an advertisement.

Kelly Blue Book just published their 2010 list of vehicles with their retained value and depreciation: Less than HALF of all new vehicles this year are projected to be worth 20% or more after five years. That is a staggering figure. The brands that will best hold their values:
Number one is Lexus, followed by Toyota (and that’s not accurate anymore with their current problems) and Honda. The only European brand in the top tier of vehicles that hold their resale value is BMW, which is fourth, and Subaru rounds up the top five.

Overall, the average vehicle will be worth 32% of new vehicle price in five years. So remember that the longer you keep the vehicle, the less it matters. But the shorter buying cycle, or anyone fleasing…I mean leasing the vehicle, the more you will feel some real financial pain of paying for the depreciation.

Have you heard of the Visa Black credit card? Well, they just sent me an invite. It’s a great looking, high quality, wedding-type invitation. But inside, it’s just another credit card application with great marketing. You are hereby invited to join an exclusive club limited to only one percent of the population. But at 13.25%, the rate isn’t very exclusive, and the annual fee is $495. But the card is made with actual carbon and guaranteed to get you noticed. Really? Is that why I need a credit card? It also talks about “fantastic rewards,” but doesn’t list any of them at all. I’m afraid I’d be getting a plain burger for the price of a steak.

Good old CBC is now getting into the product placement market. A lot of it will be with TD/Canada Trust. The bank will show up (OK, not show up – pay to be included is more like it) on Being Erica, Little Mosque on the Prairie and Hartland.

Reward & Frequent Flyer Points: Think of Them as Bananas

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The deal with any reward program was always that you spend literally tens of thousands of dollars on airline tickets, or charges on your credit card. In return, you would get some free flights, or other kind of rewards, way down the road when you finally accumulated enough points.

You kept your part of the deal. You charged away, and kept flying and staying loyal to a specific airline. But right now, you’re being played, as the airlines and many other reward programs are not keeping their part of the bargain. According to the Wall Street Journal, overall reward perks dropped by 29% last year and an IBM Global survey reports that less than 48% of us are satisfied with our airline reward program.

Should you go in arrears on your credit card, cancel it or the company goes under, your reward points will be gone. To assure you receive at least some of the benefits of what you signed up for, forget collecting points for the super expensive and cool reward. Take your points and redeem them. At least you will get something, which is a whole lot more than nothing. Read the fine print for changes, redemption fees, and watch for increased points thresholds with fewer rewards.

In the airline industry, the shrinkage of points and the growth of restrictions are even more noticeable. Start to take the convenient schedule, the direct flight and cheapest ticket. Never mind any loyalty to a particular airline that will most assuredly change the goalposts on you, way before you ever get close to a free flight.

The sharp drop in frequent flyer point values has also started to erode loyalty from customers – and rightly so. The percentage of people who are loyal to an airline is down to 25%, according to Forrester Research. And airlines have done it to themselves. The programs used to be about 2 cents per mile in these programs. Now it’s down to barely 1 cent, that’s a 50% drop in what you’re getting, and in what you’re holding in points values!

At the same time, there can now be fees to redeem, to call them, to book a flight, to check a suitcase, massive last minute surcharges in points, and the likes, which drastically erode the value of these so-called “free” points even more.

The other big killer is that airlines make a pile of money selling their points to car rental companies, flower and hardware stores and, well – anyone that wants to pay cash up front. Last year, United Airlines made over $800 million just by selling points. At American Airlines, it was more than a billion dollars! Those are cash for an airline but it’s a staggering amounts of points dumped into the world, and now there are literally billions of points chasing the same few seats. It’s supply and demand.

Right now, it’s heads they win, tails you lose. Do not let your points get eaten up, wiped out, or shrink away. Make it a point to redeem what you can and think of them more like bananas instead of an asset! Something sort of free today is better than nothing down the road.