Tag Archives: frequent flyer points

The (Last) Half Hour

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For the past two weeks, we talked about a number of financial steps that can be done inside of half an hour that will have a significant impact on your financial life.

Do a budget just once
Set up a separate savings account
See your payroll department: Fill out the payroll form to have some money deducted right off your cheque
Apply for a charge card that has no monthly payments and makes you pay the balance in full each month
Set up a TFSA (Tax Free Savings Account)
Get your kids or grandkids on track with one-third of their money into savings, one-third to giving, and one-third for spending.

Here are the final three steps. We’ve saved the best, or most important, for last:

-Get your free credit report: Once a year you’re entitled to see your credit report. It’s the snapshot of what all lenders report about you. Go to Equifax.ca for the form. It’s free by mail with some ID, or spend the few bucks and get it online. You have to know what’s in your credit file. About one-third of credit files have errors big enough to prevent you from getting preferred interest rates or getting approved at all. You can’t change what you don’t know.

-Make a financial date night with your partner: In relationships, most people do not want to talk about money, debts, or budgeting. Small wonder money and money arguments are the top reasons for divorce. Take half an hour, longer if you can, and just talk about the state of your finances, bills, budget, and what your goals and dreams are. It’s your partner in more than title. It isn’t HER money or HIS money – it’s our money.

If only one of you handles all that, you’re in trouble. The partner in control isn’t your Mommy or Daddy, and the other partner often starts to rebel by dialing out, making an argument, getting entrenched about THEIR money, or lashing out through stupid spending or hiding debts. You need to do this together.

-Cash out your points: Take half an hour and look at the various points or rewards you’re chasing. Unless you’re honestly on track for something big, cash them out. Many expire and even more never get used. Don’t do it – get them redeemed. Rough rule of thumb is the best bang for your buck – or points – is to redeem them for gasoline gift cards. That way they turn to real cash, and you’re guaranteed to use them up. Plan B is to buy that toaster with points, instead of going to a retailer and buying it for half the money…

Today you haven’t reached your financial dreams or goals yet. But you’re one day close than you were yesterday. That’s assuming you have dreams or goals. After all, you can’t reach what you don’t work towards.

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.