I’m a big believer in getting all the mileage you can out of free points and programs offered by retailers and banks through credit card rewards and loyalty programs. At the same time, I think even the best savers sometimes need to take a step back and evaluate their purchasing habits as well as the programs they’ve signed up for.
Are Air Miles & Travel Points Really that Great?
I’ll use myself as an example here. We had a travel credit card in our family that we’d use for dinners and other fun things. We thought it was great, smiling thinking we were racking up travel points, dreaming of where we could go. The reality was the return on our money spent wasn’t the best it could be, it wasn’t a great card. Also, in the end, we were stuck with the only option being to spend those points on, well… travel.
After using the card for about a year and spending all the points on credits towards two vacations, I finally clued in that we’d be much better off getting a cashback card at 2%. Not only that, but the money would be available right away and not locked in a travel “fund”. I think many people get hooked on the idea of “the reward” or the pot of gold at the end of the rainbow, whatever that final destination might be. It’s more fun to dream about that idyllic trip to a 5-star resort in the Bahamas than to watch $20 trickle into your bank account each month.
I’ve also unfortunately signed up for things like the Air Miles program in the past when it took an insane amount of time to amass enough reward miles to go anywhere worthwhile. Not to mention, redemptions were always double the point during peak seasons (which makes sense but people don’t think about this when they begin collecting). Most of us end up redeeming points for things we never intended to buy. “Stuff”, like cheap BBQs or overpriced electronics. You end up spending the points just to feel like you at least got something after possibly years of collecting.
Cash is King
I’m a firm believer now in only collecting cash rewards and finding the best cards to do it with. The exceptions generally would be when you can take advantage of introductory bonuses, or special offers. The card also needs to be collecting points that you’ll actually use at some point in the future and will deliver value. One thing to beware of with many of these top-rated cards of course is the annual fee. Ensure that the fee is worth the amount of bonus cash you will receive… most often it’s not for the average consumer.
Rebates can be enticing
There are many other types of rebate programs now available online like Rakuten.ca where you get a percentage of cashback on your shopping trips to various stores. I love this site and it’s great to pocket a bit of extra cash — but use the site wisely! The allure of points for shopping online can sometimes be too much for people. Searching for something to buy online, simply because there’s a big 10% cashback promo happening, making purchasing something seem like a good idea. But is the deal so great if it’s something you didn’t really intend to buy n the first place? My verdict is to use it for regular purchases you need, but proceed with caution! These sites have an addictive element of collecting very small amounts of cashback.
Be Careful with your Spending
Even if it’s something you keep tabs on, it’s always helpful to get a reminder and do a check-in every once in awhile on your spending habits. The same rules apply to cashback rewards cards. A lot of people get their statements and see what they “earned” – and while it’s fun to brag about all the cashback you got last year, how much did you spend? And how much of it was on necessities? The path to building wealth is definitely not by spending money on things you don’t need.
I still remember a friend telling me he had the same cashback card and bragging about how he had “earned” a whopping $1500 in bonuses over less than a year. It sounded pretty impressive – and it probably made him feel a lot better about the massive amount of money he’d spent. Unfortunately, it was likely on “stuff” and not items that were truly needed.
There are of course, situations where it makes sense to rack up that much extra cash if you’re doing home renovations or making other large purchases out of necessity. The key is to remember that the appeal of racking up points on wants vs. needs will probably ultimately cost you and your family more money in the long run than you’re actually saving. Be a smart collector!
I recently wrote about Travel Credit Cards. I got 2 new credit cards just last weekend. I am like you always prefer cash back or Aeroplan Points. No other crap. Although I get these cards for the bonus then cancel! Momentum Visa Infinite is what I will get and keep for its 4%.
I keep CT Elite MC for its 3% on Grocery (Except Walmart and Costco). Rogers World Elite MC for its 1.5% on everything for now.
For traveling, I am eyeing “Scotiabank Passport Visa Infinite”. Honestly, it seems to be the best card I have found so far. No FX and amazing Insurance. The good thing is that Scotia Rewards are straight forward and worth 1%. So a 10,000 points is $100. And a 4% back in scotia reward points is basically equal to 4% cash back and the points can be used to pay down the credit card balance, or get converted to cash. The $139 is a bit discouraging but it comes with 6 complimentary lounge per year and can also be mixed with other scotia chequing accounts to eliminate the fee.
I will have to check out that post! I’ve been paring down cards lately but may have to see what new Scotia offers are out there – probably the only cards I haven’t gotten.
I wouldn’t be surprised if some new Aeroplan offers come up. From my most recent calls with the credit card companies, it seems they’re really eager to get people spending again. I called to downgrade from a AP Visa Infinite to a no fee cash back, and they offered to waive the fee for a year again.
Solid advice that highlights the fact that there’s not a ‘one-size-fits-all’ solution to optimizing credit card rewards. One thing I struggled with for a long time was remembering to use the correct card for my purchases – for example, I’d use my card with the highest base reward rate, only to later discover that another of my card was offering extra rewards because of a rotating category, or via their shopping portal.
So, I created a Chrome extension to remind me of opportunities to earn rewards while I’m shopping online – it’s free, safe (no sensitive info required), and has helped me maximize my credit card rewards this year. Sharing here in the hope that it will help others take full advantage of their credit card rewards!
https://chrome.google.com/webstore/detail/addup-rewards/dbankcfkhcbaagbmljfplpmfenkdfifl
Wow, that’s cool and a great solution. Similar to some of the plugins for online shopping sites where you might forget to sign in for cashback etc. It can definitely become a chore to try and keep track of the best use cases for each card when you have multiple options!