Like most young people, Brian Kelly was more computer savvy than his parents. His father had racked up a large number of frequent flyer points while travelling for business, but had no idea how to cash them in.
When Brian was just 12 years old, he sat down at a computer and with his parents’ permission booked the entire family of six on a vacation to the Cayman Islands using his father’s travel reward points. That was his first foray into the world of incentive travel and since then he has become one of the world’s leading experts on the topic, quitting his job on Wall Street to manage and grow his website, ThePointsGuy.com.
Knowing how to collect and cash in travel rewards is a valuable skill and some people take better advantage of incentive programs than others. Last year, Kelly collected more than a million miles through travel points programs and he spends his time teaching other people how to do it. Whether it’s frequent flyer points for travelling with a particular airline, travel rewards points for shopping at specific stores or credit card incentive travel programs, Kelly says that savvy consumers can travel more and get more value from their reward points simply by being more strategic in their use of such incentive programs.
A recent survey commissioned by American Express polled 1,343 randomly selected Canadian adults and found that only 15 per cent of credit card holders researched their options prior to signing up for a credit card. Another 27 per cent of credit card holders admitted to not understanding what their rewards program actually offers.
The next few months will be a key time for Canadians to re-examine the travel rewards credit cards in their wallets, because big changes are happening in the market.
In September, TD Bank Group and Canadian Imperial Bank of Commerce (CIBC) settled a deal regarding Aeroplan loyalty Visa credit cards that will see 550,000 credit cardholder accounts transferred from CIBC to TD in January 2014. Most Aeroplan Visa credit cardholders have not even been notified of this impending change, but some of those who have heard about it through media reports were incensed by the fact that they were not even consulted.
“We are at a pivotal time in the Canadian credit card sector,” admits Brett Mooney, vice-president of Consumer Acquisitions and Management for American Express Canada. “Our research shows that rewards programs are important to Canadian consumers and we believe many will be examining their options in light of the changes that will be taking place in the New Year.”
American Express and other companies will likely be developing product and sweetening their rewards programs in an effort to woo new customers.
When looking at credit card travel reward programs, there are four factors consumers should take into account when determining which travel rewards credit card will be the most beneficial for them.
Earning potential
Carefully examine the number of points you earn for each dollar spent and the number of points required in order to claim a reward.
“Consumers should consider how they spend their money and look for a points program that offers bonus points in their peak spending categories,” says Kelly.
“Some credit cards offer double points for gas, groceries or travel purchases. For consumers whose peak spending falls into those categories, a card that offers double points will help them earn rewards faster.”
Redemption flexibility
Flexibility makes it easier to use your rewards points when it comes time to cash them in.
Look at whether the card allows you to transfer points to different airlines or limits you to a single airline. Rewards programs may be affiliated with a particular airline, but if you are able to travel on other airlines within their alliance that broadens the potential of the program.
Some credit card reward programs allow you to redeem travel on any airline.
The more diversified the transfer partners, the easier it will be to use those points for travel.
Sign-up bonuses
Sign-up bonuses are one method credit card companies use to entice new customers.
Offers may include points simply for signing up for a credit card, waiving the annual fees for the first year or giving bonus points for spending a certain amount on the card within a specified time frame.
Extra travel perks
Many travel rewards cards also offer extra perks such as lounge access, car rental insurance, cancellation insurance, baggage insurance and purchase protection.
These travel perks can be a real advantage to consumers and should be considered when choosing a rewards credit card.
The recent developments with the Aeroplan visa card are a wakeup call for Canadians. “No one likes the hassle of applying for a new credit card or changing their automatic bill payments, but rewards points can be valuable,” says Kelly. “This is a perfect time for Canadian consumers to sit back and assess whether or not their credit cards are working for them.”
Remember to redeem smart
• Booking your travel well in advance will help you get the flights you want and use less points in the process.
• Consider the value you are getting for your points when you redeem them. You will typically get more bang for your buck by using your points to purchase first class tickets instead of economy class tickets — especially on transatlantic flights. You will also typically get more value for your points by redeeming for travel instead of merchandise.
For example, an economy ticket with Air Canada from Calgary to London may cost about $1060, while a first class ticket will cost $5800 (more than 5 times the cost). Using Aeroplan points, an economy ticket may be purchased for 60,000 points while a first class ticket will cost 90,000 points (1.5 times the cost). 90,000 points could also be used to purchase a camera worth about $600. In this case, redeeming points for first class travel represents the best value – and you get the added bonus of travelling in a lie-flat seat and enjoying gourmet meals.
Four tips to earn more miles faster
• Never carry a balance on your credit card — the interest paid will offset any value you are getting from a rewards program.
• Use your card for everyday purchases like gas and groceries to maximize your rewards.
• Be aware of bonus point offers and direct purchases to maximize these offers. For example, some cards offer 5,000 bonus points if you spend $1000 on the card within the first three months.
• You can rack up more rewards points by using your card on major purchases such as vehicles, boats or even a home. If you are building a house, you can use your rewards card to pay for building supplies, home decorating and furnishings.
Debbie Olsen is a Lacombe-based freelance writer. Follow Debbie’s travels at www.wanderwoman.ca. If you have an interesting travel story you would like to share, please email: DOGO@telusplanet.net or write to: Debbie Olsen, c/o Red Deer Advocate, 2950 Bremner Ave., Red Deer, Alta., T4R 1M9.