Choosing the Best Travel Rewards Credit Card
Travelling as much as we do, we need to get creative when it comes to budgeting our many excursions outside of Toronto. Now that the kids are both over 2, every plane ride we take costs double what it was in our carefree, childless days. It goes without saying that we collect travel miles on our credit card. I have been using a premium travel rewards credit card since I walked into my local RBC a few days after being accepted to the Schulich School of Business. The RBC rep I spoke with set me up with a hefty loan and my first RBC Visa Platinum Avion Card. My life as a points collector had begun.
In my study years, I didn’t give too much thought to how I used the points I accumulated. The first time I used them, I cashed in 30,000 points for $250 in Future Shop gift cards. My amplifier had stopped working, I needed a new one, and so I happily subsidized the purchase with the points I had accumulated. The next time I decided to dip in, I chose merchandise, relinquishing another 35,000 points for pair of Bose noise cancelling headphones that would have set me back about $300. It wasn’t until I met Yashy that I used the points for travel, purchasing a ticket to London, England in 2011 for 65,000 points, saving myself about $700, marking my most efficient use of reward benefits to that point.
This year I decided to take a closer look. This family of four intends to travel, a lot, and so it was time for me to look ahead.
In Canada, we have four major points programs: Aeroplan, Air Miles, Avion, and Aventura. The major banks are all affiliated with at least one of these programs. I have seen countless articles on the internet that rank the various cards available, describing in detail the differences between the card’s rewards, insurance policies, and member features. One can quickly get lost in minutiae of the offerings. Rather than reading through the fine print and attempting the maddening exercise of calculating the best overall value, the most important step I am making is to look ahead to determine what we will need from our credit card. For us, it’s health insurance while travelling and cheap flights.
Emergency Medical Insurance
I have heard some first hand horror stories about the cost of medical care in the United States, with one friend narrowly avoiding a $3 Million medical bill that would have financially crippled the family. Having emergency medical insurance, more so than the occasional rewards I am able to collect, is the number one reason why I pay for an Annual Fee credit card. I have read through this section of my card’s insurance numerous times and encourage anyone using their credit card’s medical insurance to do the same. The key word to remember is that this is emergency insurance. Don’t expect to get your antibiotics paid for on vacation or to visit a doctor for a checkup, but know that insurance is comprehensive. A few important points to remember are, should you require emergency care, to call the insurance company as soon as you are able and that you likely won’t be covered for skydiving, bungee jumping, or of course, for injuries incurred while committing a crime (does jaywalking count I wonder). Also keep in mind that there is a limit on the number of days the insurance lasts. My card indicates 15 days as the coverage period (3 days for those over aged 65), but I do have an option to top up the insurance. Most importantly, check if your Spouse and Children are covered. Mine are with my Visa Infinite Avion, and I suspect most Annual Fee credit cards also cover spouses and kids, but it never hurts to make sure.
Getting the Most out of Accumulated Points
I admit to have been an inefficient user of my credit card points in the past, but vow to become an expert. This summer, we are travelling to Newfoundland for my cousin’s wedding, flying first into Sydney, Nova Scotia before taking the ferry over to The Rock. Having accumulated quite a few Air Miles from my trusty, blue Air Miles Card, even getting it to up Gold level over the last couple years, I pulled up the Air Miles website to see if I might be able to cover the trip. Looking at the chart, I discovered that I would need 2200 Air Miles for each ticket to Sydney. Alas, I had but 7,200, enough for only three flights. Resigned to having to pay for the 4th, I started the process and noticed the advertisement for the BMO World Elite MasterCard, which not only came with 1,000 welcome miles, but also allows cardholders to use 25% fewer Air Miles to book flights! With the card, I could get the 8,800 points needed down to 6,600, essential getting a free flight that would have otherwise cost $500. I ordered the card, received it in a few days, and with my first purchase ordered the tickets to Newfoundland. The taxes on the 4 tickets came to $522.92, pretty good for a flight that would otherwise have cost about $2,500. Those 6,600 Air Miles were worth $2,000 in this instance, and that got me thinking… how much did it cost me to collect those miles and were their more efficient ways get the free flight?
I realize now that family is a big factor in the rewards program I will use going forward. My parents and youngest sister all live in Sydney, Nova Scotia, and most of my extended family live in and around St. John’s, Newfoundland. On top of being terrific places to vacation, those two destinations are going to be a big part of our travel plans for the future. I suddenly realised that the key to choosing the right rewards card is to identify a destination that you will be visiting frequently and find the card that will let you spend the least amount of money to accumulate the points you need to get there. Realistically, with 4 tickets needed, we’ll only be cashing in every three or four years and so we will pay for our other vacations while saving big time on our regular family trips.
Here are the figures I’ve calculated, as of March 2016, to purchase 1 round trip ticket from Toronto to Sydney. I noticed today that the cost of an Air Miles flight has already jumped from 2,200 to 2,500 in the high season!
Destination — Home (Sydney, NS or St. John’s, NF)
Reward Program Points/Miles Needed Approximate Minimum Spend** Maximum Spend BMO World Elite Air Miles 1,875* $17,857 $18,750 RBC Infinite Avion 35,000 $33,333 $35,000 TD Infinite Aeroplan 25,000 $23,809 $25,000 CIBC Aventura 35,000 $33,333 $35,000
* Includes 25% discount for Cardholders
** Based on obtaining bonus points on certain purchases. Here, 5% of purchases are assumed to received bonus points
Seems like a no brainer right? I can accumulate the points I need to earn one flight to Sydney after spending about $17,857 on the BMO World Elite card, and if I am meticulous about maximizing Air Miles, I can earn about 500 extra miles a year with the grocery store coupons that always show up in my mail. Because of the way Air Miles sets the number of miles needed, it is the most beneficial card for me. The other three rewards programs use a flat rate for travel from Ontario to destinations within the US and Canada, whereas Air Miles has several zones within US and Canada, calculating points based on the distance from the departure zone. The best card to use will change based on where you are departing and arriving. Had my family lived in San Diego, my calculations tell me that Aeroplan is the best option, though most of my searches using Aeroplan reveal that the fixed number of rewards advertised, in this case 25,000, really only works for flights in the off season.
The Catch with Air Miles
The one major issue with choosing Air Miles is that the Air Miles redemption process can occasionally be described as hell on earth. When I redeemed points for the Sydney flight back in January, I looked up and selected the flights I wanted, entered the contact details and passport information for 4 travellers, and when I submitted the order, the system revealed to me that the flight I had chosen was no longer available, and so I tried again with different flights, and the same thing happened! Intent on making it work, I finally succeeded on my third try, after filling out all the details for a third time (since the site didn’t remember the passenger details I had entered). I had to settle for a connection on our return flight and the whole process took me at least an hour. The previous time I had redeemed points for air travel was on the RBC Avion site and the process was very smooth. Maybe I was unlucky, but I have talked to others about redeeming Air Miles and the experience never seems to go smoothly. They certainly make you work for those free flights, but patience is a virtue with dealing with rewards programs.
Air Miles and Aeroplan both seem to offer a limited number of flights at the advertised base rate. This is fine if you have finalized your travel plans 6 months in advance. A strength of the Avion program is that you can use the points on any flight, up to a maximum dollar amount that is very reasonable. In general, you can book your flight for the advertised number of points needed with no issues, but it is more costly to accumulate Avion points. CIBC’s Aventura program works the same way as Avion, with no blackouts and availability on any flight you choose. However, my goal is to use my points on regular trips back home, vacations that I can plan at least 6 months in advance, making the BMO World Elite MasterCard the ideal card for me at this time.
The world of credit cards is in constant change and I hope to keep tabs on it and share with you the lessons I learn along the way. One way to travel cheaper is to definitely shop smarter and make use of the travel rewards programs on offer.