Credit Cards: astute decisions reap rewards
When I’m buying travel I want value for my money.
Value can be luxurious or very basic – it depends on my mood and the trip. What’s important to me (and many others) is that I get the quality I want for the fewest dollars.
Credit card points can help. In the past, my modus operandi when it came to credit cards was to choose the free credit card with the most benefits.
Then I learned better. I now happily pay a fee for my card every year because I earn back that fee many times over in real currency. I receive soft benefits as well.
A recent American Express survey of Canadians found that while they value rewards programs, they’re passive when it comes to choosing their credit cards. Only 15% say they research their options and most (60%) admit that they simply use the card that their bank suggests. Let’s change this.
But transparency first: this post is sponsored by American Express. They want people to think carefully about the credit cards they choose. I do too. My whole mission is to help people travel more. So exploring the credit card rewards game is relevant. To be clear, the views and opinions expressed in this post are purely my own.
The right credit card can help you travel more.
The results of the American Express survey are clear. Travelers are leaving money on the table. I understand – who has time to sort out which of the dozens of cards make the most sense for you. But, if the process takes two hours and you earn, say, $500 per year from your card I think those are two hours well-spent. So let’s get to an analysis.
The challenge is in determining which card is right for you and your lifestyle. To do so you need to look at:
- The card cost
- Your spending habits
- The benefits that the card offers.
Since the financial rewards are important to most people, let’s start there.
The money and points equation.
Points are earned with most credit cards. However, what it takes to earn a point and the value of a point when cashing it in will vary from one credit card to another. To determine which card is best for you, it’s important to dig into the details.
Look first at how points are earned
Using the American Express Gold Rewards Card I earn:
- 2 points per dollar spent using the card at eligible gas stations, grocery stores and drug stores in Canada and on eligible travel purchases, including flights, hotels, car rentals, cruises. Hmm, but what does eligible mean? I looked at the footnotes and the eligible gas, groceries and drugs are those where one of the three is the primary business of the store. As for travel, the ineligible purchases are local transit. Works for me.
- 1 point for every other dollar spent on the card.
What I like here is that the things that almost everyone must buy get double points whereas discretionary items such as clothes and entertainment don’t. This is one of the reasons this card works for me.
Now look at the value of a point when cashed in.
With American Express Gold Rewards Card, I earn $10 for every 1000 points.
To decide whether this is a useful card for me, I needed to play out a scenario – as will you. Assuming that I spend $30,000 per year on my card (I use if for everything) my points will add up this way:
- 70% would qualify for double points. That’s 42,000 points
- 30% wouldn’t qualify so, at single points, that’s 9,000 points
- Total: 51,000 points.
At 1000 points per $10 that adds up to $510 worth of value.
I’ve run the scenario for other cards as well and, on a straight points for dollars basis, the American Express Gold Rewards Card came out as the better choice. But, there are other issues at play. Let’s dig deeper.
Beyond the dollars: other reasons behind my credit card choice.
Understanding the cost and value of points is important when choosing a card but so are the mechanisms for claiming your rewards and the other benefits on offer. I like the American Express Gold Rewards Card because I can:
- Charge any travel I find to my card and then call American Express to redeem the points to pay for all or part of my travels – this even works for taxes and fees.
- I can also wait, accumulate more points and redeem them towards my travel charge up to 12 months after my trip. This is a huge benefit for those who travel only once or twice a year.
- Transfer points instantly 1:1 to Aeroplan and Avios Delta SkyMiles, Asia Miles, Starwood Preferred Guest and more to take advantage of special offers they may have.
- If you have the Gold Rewards Card, you can earn 10,000 Membership Reward points when you refer a friend to the Card, that’s enough for a $100 credit on your next flight. Plus your friend will earn 25,000 Membership rewards points, which is enough for your friend to redeem for a flight anywhere in North America.
So, it’s not just a matter of liking the return on my points that has me preferring the American Express Gold Rewards Card but also the other benefits as outlined above.
Please note: to win with credit card rewards, you need to pay the card off every month. If you pay interest on your card, you will likely negate any value you’ve earned.
Canadians: the American Express Gold Rewards Card
As mentioned above, American Express has sponsored this post. I hope the analysis above will encourage you to check out the American Express Gold Rewards Card as part of your research. At the moment, they’re offering some additional benefits:
No annual fee for first year – it’s $150/year after that.
- A Welcome Bonus of 25,000 Membership Rewards points when you charge $500 in purchases to your Card in your first 3 months of card membership. (That’s a short-haul flight.)
- 1 Free Supplementary Gold Rewards Card for a partner (a $50 value) to help you earn points faster.