How credit card travel rewards beat cashback

By | July 12, 2022

In the lockdown phase of the COVID-19 pandemic, the reasonable thing to do with your credit card rewards is switch to cashback from travel points. The public health challenge still remains, but the easing of restrictions has now led to a travel boom.

For some help speeding up the latest developments in travel rewards, check out this e-mail Q&A I did with Barry Choi. Mr. blogged. Choi at Money We Have, and is a leading expert on travel and reward programs.

Some travel-reward programs are moving to a dynamic pricing model-can you give us some examples and an explanation of what this means for getting points?

Aeroplan and Marriott Bonvoy have switched to fully dynamic pricing, and Air Miles is doing the same. Where the number of points required for redemptions depends on supply and demand. More popular flights, hotels and hours will cost you more points than less interest ones.

From a consumer’s perspective, you just need to analyze the programs to see where you benefit the most. For example, with Aeroplan, changing your flight date or time can save you a fair amount of points. Aeroplan also has a fixed redemption chart for partner airlines, where the number of points required for a flight is significantly lower than the high end of dynamic pricing on Air Canada flights.

Cashback rewards were popular during pandemic lockdowns – how do you compare the value from cashback versus travel rewards, where you use points for flights, hotels and more?

You must first establish a base price for your points. To do this, you take the cash price of your redemption and then deduct any taxes you have to pay when using the points. You multiply that number by 100 and then divide it by the number of points needed for redemption.

For example, let’s say you’re considering a round-trip Aeroplan flight from Toronto to Los Angeles. The cash price is $ 600 or 25,000 Aeroplan points plus $ 50 in taxes. The formula you will use is as follows: ($ 600 minus $ 50) times 100 divided by 25,000 = 2.2 cents per point. Most travel loyalty experts value an Aeroplan point at two cents, so the example above represents great value. If the amount of your redemption is less than the average accepted amount, you are better off paying cash.

Now let’s say you’re debating between a cashback or travel-rewards credit card. A cashback card that gives you a 2 percent return on groceries may seem more attractive than an Aeroplan credit card that gives you 1.5 points for every $ 1 spent. However, when you consider the value of your travel-rewards points, the Aeroplan card will definitely come to the fore. Travel credit cards often also include additional benefits such as access to the airport lounge, free checked bags and travel insurance. You can’t get that with a cashback card.

Aeroplan has refreshed its frequent-flying program and is signing up new retail partners. What is your view on Aeroplan’s status in customer loyalty programs?

In other words, the Aeroplan is crushing it. They have added more retail and airline partners over the past few years. They facilitated revenue and status maintenance during the pandemic and they had flexible policy changes. Many people who collect travel reward points will argue that Aeroplan is the best airline loyalty program available.

What do you notice about the reward credit-card welcome offer for new clients?

The current welcome bonuses are not as rich as some of the offers from the beginning of the year. That said, American Express continues to have some of the most generous sign-up bonuses on the market. Some credit card issuers are trying new strategies to retain customers. Instead of offering a full bonus after you reach the minimum spending requirement, they now ask you to spend a fixed amount each month for a few months. It was clearly implemented to try and encourage people to continue using their cards rather than stop after they get their welcome offer.

What are your personal favorite loyalty programs?

Aeroplan will always be my top travel loyalty program because they are the most flexible when it comes to revenue and burning points. This year alone, I earned over 500,000 points on Aeroplan and booked business-class flights to points in London, Bangkok, Los Angeles and Orlando. American Express Membership Rewards is my favorite bank travel-rewards program. Unlike other bank loyalty programs, you can redeem your points for a credit statement at the same amount of travel withdrawals. You can also transfer your points to Aeroplan and Marriott Bonvoy, which can increase the value of your points. One nontravel loyalty program that I am a huge fan of is PC Optimum.


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