Tag Archives: redeeming points

The World of Reward Points Is Changing

Leave a reply

The average Canadian has five reward programs of one kind or another. It might be a 10th free haircut, frequent flyer miles, 10% off if you spend over a certain amount, or rewards on your credit card.

Whatever you’ve figured out about them will be all different in the next few years. In short, the programs will be converting from volume to profitability and the opposite for credit card rewards. Right now, you’re getting rewards on your visits or spending totals. Down the road it’ll be whether you buy something profitable. No more points (or very few) to buy something at a discount, but now big rewards when you buy something way overpriced or at full retail price.

In the airline business, Air Canada has done three quiet changes to their reward programs already. Cheap seat-sale tickets now get you 25% of the miles versus full price so-called Flex tickets. Delta Airlines is already the process of fully converting their frequent flyer program. If you collect miles you need to know this. It will become the norm with every other airline. You’ll no longer earn miles based on distance flown, but on the amount you spent. It’s turning frequent flyer programs upside down. So, a last minute ticket to Vancouver at a big price will get you more miles than a discount flight to Europe.

The programs will be based on your profitability with the airline. If you make them a ton of profit – you’ll get a ton of miles. The biggest losers will be those of us who are price sensitive and bargain shop for flights. In the next few months I’m cashing out all my miles for gift cards or cash – better safe than sorry. When this comes to other airlines, you’ll be way better off getting a points reward card that lets you accumulate points for gas and other purchases – you’ll end up getting a lot more rewards than from an airline!

In the credit card world, the change will be to quantity of transactions. American Express has now introduced a new credit card that will increase your reward points by 20% once you reach 20 transactions in a month. For Amex that makes sense because their average client spends four times as much per transaction, and has a much higher average income. It’s just maximizing their transaction fees.

There was a recent study that found over a third of all reward programs are never claimed. In the airline world, according to Consumer Report, over 75% of miles are never claimed. Stop chasing and start cashing out. You won’t be a prisoner to one company or another and will become a free agent that can get the best deal from any company. I’ve started cashing out my Aeroplan miles by getting $2,000 in Esso gift cards. Check what you can redeem for the least amount of points or miles. With Aeroplan, chasing a free ticket can be a fools game. Gift cards tend to be a good deal on redemptions. Amex gift cards cost 7500 points for a $50 card whereas the Esso gift cards cost me 6500 points each.

The (Last) Half Hour

Leave a reply

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.