The whole landscape for travel rewards changed this week when Aeroplan, Canada’s top loyalty program, left its two-decade old partnership with CIBC and moved to TD Bank. Now the banks and credit card issuers are scrambling to position their travel programs as a viable alternative to Aeroplan.
Perhaps sensing that the sharks are circling in to gobble up its floundering cardholders, CIBC is exploring options which include selling half its Aerogold portfolio to TD while retaining the cardholders who have a banking relationship with CIBC.
They’re in negotiations now so we’ll know more by August 26th. But if a deal isn’t reached by then we know Aeroplan’s current agreement with CIBC will expire at the end of the year, and existing CIBC Aerogold cards will no longer be valid.
TD’s Aeroplan partnership begins January 1st and they’ll be aggressively courting Aeroplan collectors with a new suite of Aeroplan travel cards.
Consumers are caught in the middle of this messy break up and wonder where they stand. There are two important points to remember:
- Whether you get to keep your CIBC Aerogold card or not, you won’t have to worry about your Aeroplan miles disappearing because those points are linked to your Aeroplan account, not your credit card.
- All these changes in the market have the potential to be good for consumers. Banks will pull out all the stops to get your business in the coming months, giving you a chance to review the types of rewards programs available and switch to the one that offers the most value.
Lost in all the noise is the embattled Aeroplan program itself, which has alienated many loyal collectors in recent years. The number of pain points is plentiful; fees, blackouts, increased mileage required for redemption, but the biggest of which is the lack of choice when it comes to redeeming your points for a flight.
Even when you can find a flight through Aeroplan that works, there are taxes and fees due that aren’t covered by your points.
Savvy travel rewards customers are looking for a more flexible travel program that isn’t tied to any specific brand or company but instead lets you book and redeem your points when and how you want.
While TD and CIBC fight over the Aeroplan portfolio, RBC thinks they’re in a good position to take advantage of the market turmoil and gain some new customers with its Avion program.
With Avion, you can get any flight at any time with no blackout periods. 15,000 points gets you a short-haul ticket, up to a $350 value, and you can transfer points into other programs like Shoppers Optimum, Esso Extra, WestJet Dollars and British Airways.
Related: RBC Visa Infinite Avion Review
According to MLM and Maritz Research Canada’s 2013 loyalty report, RBC Visa Infinite Avion ranked first in overall satisfaction and first in ease of tracking points, enrollment experience, understanding how the program works.
Avion points also won’t expire, which has been another issue for Aeroplan members. Aeroplan announced in June that, in response to customer feedback, points will no longer expire for members who are active in the program each year.
Another flexible program to consider for earning and redeeming travel miles is Capital One’s Aspire Travel World MasterCard, the top travel rewards card on Rewards Canada and MoneySense magazine for a number of years.
With its No Hassle Rewards program you can book the travel on your own with any airline or hotel and then redeem your miles online to pay for your travel. Because it’s not tied to any one airline or travel centre you can often book better and cheaper flights to get the most out of your points.
With a flurry of marketing activity expected from banks and credit card issuers in the coming months, now is a good time for you to look at your current travel rewards program and make sure its meeting your needs.
You’ll see plenty of incentives to entice you to switch programs, from juicy sign-up bonuses to saving on annual card fees.
It’s important to remember that unless you want to switch credit cards every year you’ll need to look beyond the short term incentives to what your card will do for you over the long term.
That’s what makes the Aspire Travel World MasterCard stand out from the pack. You’ll get a tasty bonus offer of 35,000 points after your first purchase – good for $350 in travel –, plus another 10,000 points each year on your card anniversary. That essentially reduces the $120 annual fee to $20 per year.
Nearly 60% of Canadian consumers have a rewards credit card, and many of those are linked to travel rewards programs like Air Miles and Aeroplan. These two popular programs have been a staple in many Canadians’ wallets for decades, but recent changes that increase the number of points required for flights or gift card rewards have led to frustration for many consumers.
Recently, cash back rewards have gained significant ground by going after travel rewards programs on their restrictions, booking fees, expiration policies and limited flexibility.
Related: Aeroplan To Enhance Recognition Program, Cancel Expiry Policy
The allure of a “free vacation” keep many Canadians loyal to their travel rewards programs, but for me, cash back is king. Here’s why cash back beats travel rewards:
Cash Back
Cash back credit cards are as straightforward as they come. You earn cash back on your every day spending, typically 1-4%. Depending on the card, you can either redeem your cash back rewards whenever you feel like it, or once you hit the minimum threshold the card company will send you a cheque in the mail. Some cash back cards even allow you to apply your cash rewards to your credit card statement. Simple.
With a no fee card like the MBNA Smart Cash MasterCard, you can earn $16.50 a month in cash back rewards when you spend $1,250 a month (including $400 per month on groceries and gas). That’s a return of 1.3% on your spending!
Travel Rewards
With most travel rewards credit cards, you earn 1 or 2 travel points for every dollar spent. Unfortunately, it’s nearly impossible to determine the exact value of your travel rewards points. Because the price of flights and hotels vary drastically from day-to-day and season-to-season, it’s difficult to pin-point the actual cash value of your rewards.
Then there’s redeeming your travel points, which I’ve already mentioned can be a hassle when you factor in booking fees and restrictions. Also, if you’re saving your points up for a dream vacation, you have to keep the expiry policy in mind. It can take years to build up enough travel points for a long haul trip.
Related: How Many Air Miles Do You Need For A Free Flight?
I like to figure out what each mile is worth so that I know which card or program gives me the best bang for my buck. For example, if you use an Air Miles credit card you’ll typically earn 1 Air Mile for every $20 spent. If you spend $2,000 a month, you’ll earn 100 Air Miles.
When you redeem Air Miles for gift cards or with the new Air Miles Cash program, it takes 190 Air Miles to get you $20. That means each Air Mile is worth 10.5 cents. If you redeem Air Miles for flights, you might get a value closer to 17 cents per mile.
Using the above example of spending $2,000 a month with your Air Miles credit card, you’ll earn anywhere between $10.50 and $17 a month when you convert your Air Miles into cash. That’s a return of between 0.525% and 0.85% on your spending.
In order to beat the cash back rewards card you’ll need to earn twice as many Air Miles (200) each month.
Final Thoughts
I use the MBNA Smart Cash MasterCard for all my daily spending and recurring bill payments. I have been using this card for almost a year and will typically receive a $50 cheque in the mail every 4-5 weeks. If I wanted to ear-mark this reward money for travel, I can simply open up a savings account and deposit the cheque every month. Getting cash back means I can redeem my rewards for anything I want.
One travel rewards card that I will consider using is the Capital One Aspire Travel World MasterCard. Not only does this card offer some juicy rewards (double miles on every dollar spent, 35,000 welcome bonus points, and 10,000 anniversary points), but you can also redeem your points for cash.
Do you prefer to get cash back or travel rewards?