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Tuesday, December 13, 2016

Using an AIR MILES Credit Card & have your account set to 100% Cash Rewards? STOP IT RIGHT NOW!


Alright a light dawned upon us last week when Steve asked us a question on Part 3 of our 'Done With AIR MILES' series.

His question was:
How do you feel about AIR MILES cash vs. cash reward cards? I know you can "double dip" with a cash back credit card + AIR MILES at certain stores, but would you recommend that over an AIR MILES credit card earning their cash + AIR MILES card?
 and this was our response
The best AIR MILES earn rate on a credit card is 1 Reward Mile for $10. It takes 95 Miles to get $10 in cash rewards (and we're guessing that may go up soon) meaning you have to spend $950 to get the $10. If you get a card that gives 2% (like the mbna rewards World Elite) you would get $19 back. As long as the cash back card earns more than 1.05% you are better off with the cash back. Heck even a 1% card is better as you are not limited in your cash redemptions like you would be with Air Miles.
Which led us to think we should bring further attention to this. Many of you have switched to 100% Cash Rewards with the AIR MILES program and are still using an AIR MILES credit card (BMO and/or Amex) for your purchases. Well stop it right now! Either switch back to Dream Rewards or a maybe a 50/50 split between Dream Rewards and Cash Rewards so you can pull more value out of the program. If you don't want to bother with Dream Rewards as so many of you do since there isn't anything you want to redeem for and you can't find travel, then get rid of your AIR MILES branded credit card and get one that will reward you more handsomely! You can still collect Cash Rewards by simply swiping your AIR MILES loyalty card but switch your credit card.

Why? As you see from our response to Steve, you get a 1.05% return if all your spend on your AIR MILES credit card is at the 1 Reward Miles for $10 spend. The problem here is that only the BMO AIR MILES World Elite MasterCard gives you 1 Reward Miles for every $10 spent and the American Express Platinum AIR MILES and Reserve AIR MILES cards give you 1 Mile/$10 at AIR MILES Sponsors and eligible gas, grocery and drugstores. So all other spending on those latter cards and any other AIR MILES card will give you even a lesser return since they earn 1 Reward Miles for $15 or $20 in spend. That equates to a 0.7% return or 0.54% return respectively. So lets look at this quick chart if you are earning 100% cash rewards with any AIR MILES branded credit card:

1 Reward Mile for $10 spend = 1.05% return
1 Reward Mile for $15 spend = 0.7% return
1 Reward Miles for $20 spend = 0.54% return (and that's rounded up)

OK, AIR MILES Cash Rewards is essentially a cash back program right? You get to 95 Reward Miles and you can redeem those miles for $10 off a purchase instantly at places likes Sobey's, Rona, Shell, Rexall or you can order eVouchers from AIR MILES at the same rate. The issue here is that you have 9 instant redemptions partners and 18 eVoucher partners. That's a total of 27 places you can use your Cash Rewards at.

Alright lets look at this now, you are maxing out at a 1.05% return and that return can only be used at 27 places. Why limit yourself? You can get a cash Back or other travel rewards credit card that gives you a 2% return or more and you are not limited to 27 redemption partners. With Cash Back you get to choose where you use that cash or with a proprietary credit card travel rewards program you travel where you want when you want. What would you rather get? 2% back that you can use anywhere or .54 to 1.05% and be limited where you can use them?

Don't do it! PLEASE!
Now you may say that you can get more value out of double dipping with your AIR MILES credit card and swiping your AIR MILES loyalty card. Well you won't! You can still swipe your AIR MILES loyalty card when using any other credit card. Sure it may take a little longer to get to 95 Reward Miles as your not getting those miles via the credit card but no matter what you are only getting a maximum of 1.05% back on the actual credit card purchase versus those higher returns on other cards. I would gladly trade off on earning AIR MILES faster so that I can get a better return elsewhere.

Finally there is no telling if the Cash Rewards redemption rate will remain the same. AIR MILES has already warned us that they need to make up for their losses due to not expiring miles. Merchandise will most likely be the first to go up as there is no set chart to redeem against so it is easy to raise those amounts without people really noticing and then Cash Rewards will be the next easiest. It will come with backlash of course but since AIR MILES owns it 100% they can do it. What about travel rewards? That may take sometime, if AIR MILES tries to raise those again as they did after announcing the 5 year expiry (hence making some people's potential redemption options out of reach so that they had to keep collecting and then think they'll lose miles to expiry) they'll meet even larger backlash. Even the travel providers will question 'why are we partnered with AIR MILES?' if people aren't redeeming for flights since they are out of reach or those travel providers will start charging AIR MILES more, after all why provide the same discount to AIR MILES if they raise their rates right? It is a two way street after all.

Anyways, if you are using an AIR MILES Credit Card & have your account set to 100% Cash Rewards? STOP IT RIGHT NOW!

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