Wednesday, March 6, 2013

Remember people it's all about the EARN and the BURN

The title of this post comes from my post last week on the latest Amex transfer bonus to BA. It reminded me of this topic that I have had in the back of my head for sometime now about how you cannot look at loyalty programs from only one side of the coin.

From first time miles and points collectors to extremely famous frequent flyer expert bloggers, a key fact often missed by them that you have to consider with any loyalty program that has a credit card tied into it, is that you have to look at both the earning and redeeming (burning) sides as a whole. Too often, people only look at one, whether its the earn side such as "ohhh it earns 3 points per dollar" or the redemption side such as "don't redeem this way as the fuel surcharges are too much." This is a common mistake made by many and one must look at what it has taken you to earn those points for an award/reward and what you are getting in return. This becomes difficult if you only look at earning on actual flights, hotel stays or co-branded shopping but the easiest calculation comes in the credit card department and that is what I look at here in this post. 

While I could give you tons of examples and go super in-depth, I think the best way to show you how you should examine the earn and burn process with credit cards is via these three examples:

"TD Canada Trust heavily advertises 'Earn 3 Points per dollar spent' for their TD Visa First Class Infinite Card"
What's the first thing that comes to mind when you see this? "Whoa, that's awesome because my card only earns 1 point per dollar!" That is where you need to stop and read the fine print. What TD doesn't heavily advertise is their redemption ratio. So while most cards offer you a $100 Travel Credit for 10,000 points, TD only offers $50 for 10,000 points or a return of 1.5 cents on every dollar you spend. There are other cards out there that offer more even though they may only earn 1 point per dollar like the BMO World Elite MasterCard which offers a return of 1.9 cents on every dollar you spend, the Diners Club Club Rewards MasterCard which is 1.7 cents and then there are ones with variable earn rates like the American Express Gold Rewards Card which will give you up to 2 cents back per dollar if you redeem via their TripFlex option.

So my advice here is not to be swayed by some big 'earning' advertisement without checking what your return or earn and burn ratio is.

"CIBC Aeroplan Credit Cards are better than Air Miles Credit Cards as they earn 1 Mile per dollar spent versus 1 Miles for Fifteen or Twenty" 
This is very similar to the situation above but was posted as a comment to a post on Rewards Canada quite a while ago. Once again you have to look at both sides of the equation since Aeroplan and Air Miles price their flight rewards differently.  We'l take their short haul flight rewards (flights to a neighbouring province or state) as an example here. For Aeroplan, a short haul Classic Flight costs 15,000 Aeroplan Miles, with Air Miles they have some different categories but it is primarily 1,025 Reward Miles in low season or 1,200 Reward Miles in high season. So if we take other earning options out of the equation and only look at the credit cards, which is better?

With the CIBC Aerogold Cards you will need to spend between $10,000 and $15,000 (dependent on how much you spend at 1.5x multiplier locations) to get 15,000 Aeroplan Miles for a short haul redemption

With the BMO Air Miles Gold MasterCard you need to spend between $11,535 and $13,500 as you get a 25% discount on Air Miles flight redemptions.

Or if you take the new American Express Air Miles Reserve Card you will need to spend between $10,250 and $18,000 for the flight. Here it is dependent on how much you spend at Air Miles sponsors as your earning is accelerated at 1 miles/$10.

As you can see the earn and burn on all these Aeroplan and Air Miles credit cards are very similar and it is really a toss up depending on where you use your card and what time of year you travel. So to say a credit card that earns 1 Mile for $1 is better than one that earns 1 Mile for $15 or $20 is not true.

"For North America to Europe awards, I’d transfer my points to Aeroplan without a bonus vs. British Airways with the 50%. Aeroplan does impose fuel surcharges, but nothing to the extent of British Airways (think $850 for a business class flight)"*
This is a quote direct from a very famous U.S. frequent flyer blogger, he stated this last year when the 50% transfer bonus was running for Canadian Membership Rewards members and once again he is still stating it with the latest version of the  bonus. I commented last year that it may not be good advice but will reiterate why I think it may not be good advice:

True, British Airways tacks on huge fuel surcharges and Aeroplan does as well but not as high as British Airways. What he fails to mention is how much credit card spend is required to get the flight from Canada to Europe and add the fuel surcharge to see what you that flight costs you.
Take an example of a round trip business class flight from Toronto to London using the American Express Gold Rewards Card (probably the most popular Membership Rewards card in Canada).
With British Airways the flight is 80,000 Avios + $1099.05 in taxes and fees
With Air Canada the flight is 90,000 Aeroplan Miles + $953.06 in taxes and fees.
If you are going to transfer points to cover this whole flight, what will it cost you in the end?
For British Airways with the current 50% transfer bonus you need 53,333 Membership Rewards points. Assuming you got all those points at Gold Rewards Card 2x Multiplier locations you would need to spend $26,667 on your card + the 1099.05. Whereas for Aeroplan using the same multiplier you need $45,000 in spend and $953.06 in taxes and fees.
What would you rather spend to get that ticket? $27,766.05 or $45,953.06? I know which I would pick. Even being in Calgary, where I would need 20,000 more Avios for the same business class flight  it would cost me $34,432.38 versus the $45,000+ for Aeroplan. If there was no transfer bonus then BA is still cheaper from YYZ but Aeroplan would be a better choice for those of us out west.
Granted, if you are all about saving money then you should use your Avios from a Membership Rewards transfer for short haul flights or redemptions on Cathay Pacific between Canada and Asia as fuel surcharges aren't applied but I know many you have aspirational awards that include flying in style to Europe so the above example can show you how to do this the best way.

There you have it! My reasons why you need to look at both sides of the equation.  I hope these examples of how you have to look at the EARN and BURN side of loyalty programs will help you in future decisions you make in choosing a program, a redemption, or a credit card.

Do you have any examples where you have had to look at both sides to see if an offer or redemption was worth it? Please share it with the rest of Rewards Canada's readers below!

* Quote from


  1. Very well written Patrick
    It's easy to generalize things but harder to quantify them and you did that

    There is no RIGHT or WRONG, but BETTER and WORSE choices when it comes to FF programs

    For Canadians with enough AMEX MR, just diversify yourselves between Aeroplan & Avios and AMEX MR

  2. You analyses are correct but why go that route to make your point.

    Simple way;
    90000-53333 = 36667
    1099.05-953.06 = 45.99

    So that is .125 cents for MR point. Hell of a deal.

    1. I went that route as a lot of readers don't understand that .398 cents for an MR point would be a good deal and explaining that redeeming 36,667 less points versus $145.99 (you put $45.99) in savings is better. People like it when you show them the bottom line of what it costs in a comparison format. Makes it very easy to understand for everyone. But thank you for putting this calculation out there as well.