Personal Finance

Match your spending patterns with the card that best meets your needs.
By Michael Ryval | 19/07/10

In February 2009, my wife and I flew to Santiago, Chile, courtesy of our BMO MasterCard Air Miles card. We needed 11,000 Air Miles to qualify, and we did so by using the card to pay for gas, parking, charitable donations, theatre tickets, wine, newspapers, supplementary health insurance, and so on.

About the Author
Michael Ryval, a regular contributor to Morningstar, is a Toronto-based freelance writer who specializes in business and investing.

At $20 per Air Mile, that meant spending a tidy sum over several years. But since we had to make these purchases anyway, we thought, why not get the benefit? At first blush, travel rewards appear to be "free."

Yet the "free" tickets cost almost $1,000, as we had to pay Air Canada's surcharges and fees, plus cancellation insurance in the event we could not travel, thus protecting our hard-earned 11,000 Air Miles. Overall, we saved about $1,600 to $1,800, money that was spent on accommodation and meals.

Like many other people, we play the travel-rewards game with credit cards. And like many, we wonder about the growing proliferation of other offerings, also known as loyalty cards. How do you determine which travel-rewards card is the right one for you? There is no easy answer. In fact, you will need to do some homework and make careful comparisons to get the card that meets your needs.

The exercise means dealing with a market that is more crowded than ever--virtually every household has at least one travel-reward card--as banks and financial institutions keep issuing new ones with more incentives to join.

Last March, for instance, BMO Bank of Montreal launched World Elite MasterCard, a premium travel card that costs $150 a year, and has an introductory bonus of 15,000 bonus points that are worth about $285 in travel rewards. In June, Bank of Nova Scotia introduced ScotiaGold Passport Visa, which costs $99 the first year and $110 thereafter. It offers new customers 20,000 travel reward points, valued at $200 in travel, plus 10,000 points upon renewal after one year.

Meanwhile, also in June, Capital One Canada, a subsidiary of McLean, Va.-based Capital One Financial Inc., introduced Aspire World MasterCard. A premium card that costs $120 a year, it offers 35,000 bonus reward miles worth $350 in travel, plus another 10,000 miles on your first anniversary. For every dollar that you spend, you will get two reward miles. The Aspire Gold card, which has no annual fee, offers only 10,000 bonus miles and one reward mile for every dollar you spend.

"The biggest piece of advice is that you should do your research," says Laurel Ostfield, communications manager for Capital One Canada, in Toronto. "There are a lot of cards out there and they all have different benefits. It can be very complicated so people should take their time."

Ostfield notes that some cards allow you to collect a lot of miles, or points, but may not deliver as much as expected. "You have to ask, 'If I earn 10,000 reward miles, how far will it get me with a Capital One card, or a competitor's?' Reward miles can mean different things. They are not all the same."

Indeed, matters are made more complicated because each card has additional features, such as trip-cancellation insurance, out-of-country medical insurance, collision-damage waiver for car rentals, and access to business-class lounges. Some cards may offer these features, but at an additional cost. "Look at the benefits, and ask, 'Will it cost extra to buy medical insurance, for instance?'"

There are several key factors to consider, according to Patrick Sojka, the Calgary-based owner and operator of, an online resource about travel cards and loyalty programs in Canada.

  • Are you a frequent flyer? Do you fly at least once a month? If you do, says Sojka, you should focus on a card that rewards you miles directly in an airline's frequent-flyer program. CIBC Visa Aerogold and American Express AeroplanPlus Platinum Charge cards are considered the top candidates. "Airline cards give you the biggest return per dollar spent," adds Sojka. The so-called "return" is the travel value in relation to what you spend. It can be as high as 10% if you spend $80,000 a year and, for instance, book a transatlantic $8,000 business-class ticket. Generally, though, the return ranges from 1.5% to 2.2%. For instance, if you spend $30,000 a year with RBC Visa Infinite Avion you can redeem travel rewards worth $660.

  • If you are not a frequent flyer, and spend $80,000-$100,000 a year, you should still consider an airline card, says Sojka. "This allows you to get the biggest bang for your buck -- business-class flights."

  • If you spend less than $80,000 a year, then you could be better off with one of these: Capital One Aspire World MasterCard, or RBC Visa Infinite Avion, or TD First Class Travel Visa Infinite. "There's more flexibility," says Sojka. "People can fly when they want, how they want and with whichever airline they wish. They just want the best deals." Another alternative is BMO MasterCard Air Miles. However, cardholders can travel only economy class and are limited to 11 partner airlines, including Air Canada, American Airlines and WestJet.

Consolidation is critical. "Don't spread yourself too thin," says Sojka. He recommends no more than three rewards programs, but preferably two, as it will speed up the process of accumulating miles or points.

As for us, even though we've been playing the game for some time, we've learned a little more about reward-miles programs. Last spring, we tried to book a flight to Auckland, New Zealand, using each of our 100,000 Aeroplan miles. But the Star Alliance partner Air New Zealand did not offer business-class seats.

We went to our plan B and booked a trip to Hong Kong, with stops in Ho Chi Minh City and Hanoi, and returning from Tokyo. Best of all, we got business-class seats, which will make the very long trans-Pacific journey more comfortable.

The only catch? We had to book our tickets more than 11 months in advance. Otherwise we'd miss out on Air Canada's limited allotment of business-class seats.

Of course, it took some time, and money, to accumulate those Aeroplan miles. But that will be the last thing on our minds, when we take our next winter vacation knowing we're savings thousands of dollars and, best of all, going in style.

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