Credit card reward programs are a complicated thing. Some companies offer reward 'miles', others offer 'points'. The points to purchase ratio is the amount you must spend on the card to earn a reward mile or point. It is important to know this value in order to determine if you have enough 'purchasing power' to make the travel reward card worthwhile.
Most cards offer a straight 1:1 ratio, that is 1 mile or point for $1.00 spent on the card. Some, such as the popular Air Miles program, offer 1 mile per $20 spent, which may seem like a lot but one must bear in mind that there are no fees associated with Air Miles, nor any interest charges. It is essentially a free reward, provided you are a member of the program.
What is important for travellers then, is to know how many points or miles are needed to take a trip. This can be figured out quite easily by researching the program on their website, where details of the amount of miles or points needed for a trip are published.
For example, on the Aeroplan website, which is associated with Air Canada and Star Alliance, we can find these statistics:
-
Domestic Flights in Canada: 15,000 to 25,000 points
-
Flights to the USA: 25,000 to 40,000 points
-
Flights to Europe: 60,000 to 75,000 points
-
Flights to Japan: 75,000 points
With the strict 1:1 ratio, we must spend a minimum of $15,000 on the card in order to earn a free trip (not including bonus points awarded and the occasional 1.5:1 ratio). Calculating how much those 'miles' are actually worth becomes much more difficult, since flight prices vary wildly.
With Airmiles, the trips start from as low as 850 miles, but you can only earn an average of 1 airmile per $20 spent, which means you must spend a minimum of $17,000 to earn enough points for a flight. Again, it is impossible to calculate the exact worth of the 'miles', since flight prices vary so much, and this is not counting bonus rewards, which can make a significant difference. It does, however, provide a basic overview of the differences in the programs.
For example, a trip with Airmiles from Toronto to Los Angeles would take 3,450 Air Miles. Earned at 20:1 that means you would have to purchase $69,000 worth in order to earn those miles. The same trip with Aeroplan would take 25,000 points, at a ratio of 1:1 only $25,000 worth of purchases to earn enough points for the flight.
What is important to look at is what sort of bonus points are possible, including sign-up bonuses, and special arrangements with merchants, where you can make a 1.5:1 or even 2:1 ratio. This can make a significant impact on saving up points for your travels.
The first thing to consider before choosing a travel reward credit card is: what do you want it for? This might seem pretty obvious, but a lot of people will simply
Read more...
Finding a great travel reward credit card depends on a number of factors, one of which is the cardholders own requirements for flexible travel rewards. Therefore it is difficult to single out
Read more...