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The True Value in Reward Redemptions
Last Updated: April 18, 2016

 

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There are people in this world of miles and points who look at maximizing the absolute value for the points or miles they earn. Heck we even talk a lot about maximizing the value for a point here on Rewards Canada. There are going to be people out there who say that you shouldn't be redeeming Aeroplan miles for education or AIR MILES for merchandise and that you should be using them for flights because there's better value in it. Is this true? Yes on paper it is but what about in reality? This is a question the media asks us frequently and in reality the best value comes from a redemption that makes you happy.

Sure we talk about value, quite a bit. This point being worth 2 cents, that mile being worth 1.5 cents and so on. We do this to provide a benchmark for those that are concerned with achieving the maximum value, comparing program value or at least seeing if what they are redeeming for is worth it in their mind. You are the point maximizers, you know who you are and you're out there but you are the minority. Most Canadians don't have the time or resources to work out the maximum value of their points or miles as they have lots going in their lives. They have kids. They have activities, They work 10 hours a day. They aren't flexible in when and where they can travel and so on.

So the question is: Are the majority of Canadians maximizing the value of their rewards?

Yes. They are. They are maximizing them to their potential and individual needs and requirements. If you are redeeming your points and miles you are maximizing the program(s) for you. It is well known in the loyalty industry that as soon as a member redeems for an award, be it a $1,000 flight or a $10 gift card, that member becomes more loyal and will use a program more. Why? They feel like that have got something out of the program and now they will want to be rewarded again. If you haven't redeemed any points or miles and are just hoarding, then you haven't maximized yet.

Here's an example, Aeroplan recently introduced the ability to redeem miles for taxes and fees on award flights and its uptake has been better than Aeroplan expected! Why? Its providing value for those who need and want it. If you visit frequent traveller forums and blogs they'll tell you how bad the value is. Sure it comes out to less than 1 cent per mile when you redeem those miles for taxes and fees versus 1.5 cents and higher for the actual flight portion. But what that doesn't take into account is how those dollars saved are used. Not everyone is rich and has the money to spend freely like many frequent travelers. For someone who has had an Aeroplan co-brand credit card for years but haven't used the miles yet this option could be the difference between them affording a trip to Europe or not. Say someone redeemed miles for the taxes and fees on a economy class flight to Europe on Air Canada. The cost in miles is effectively doubled, from 60,000 miles to around 120,000 miles. That doubling saved them from paying about $600 in taxes and fees. Now they have $600 more to spend on their vacation. Or the put into a savings account, TFSA, you name it. So that $600 has now boosted that below 1 cent valuation to something higher. Of course the other option is redeeming on a flight that doesn't have that high of charges, but again, you may not have the time in your vacation to double your travel to route via the U.S. or some other country.


Same goes for credit cards like the American Express Gold Rewards Card. Sometime ago we redeemed Aeroplan miles for four tickets to Maui and put the taxes and fees on the Amex Gold Card. When those taxes and fees appeared on my Amex statement I redeemed Membership Rewards points for the charge. I was challenged by some readers on that move. Why would you do that when you can convert them to Aeroplan or British Airways to pull out even more value. Well here's why I did it. My Gold Rewards Card is used at all the two times multiplier locations so I received a 2% return on that redemption. Would it be higher than that if I converted them? Probably. However the main is reason is that I have more points and miles than I know what to do with. I don't need to convert Membership Rewards points at the moment or anytime soon and for me redeeming less than 10% of my balance of points made sense to keep several hundred dollars in my wallet. In the end we flew to Maui completely free. That's right, not one cent was paid for the flights. That makes me happy.

So what is the true value in a reward redemption? It's whatever makes you happy. For some of you it will be four economy class tickets to Las Vegas, others it will be a pair of first class tickets on Cathay Pacific to Asia while for some of you it will be that $10 gift card. It doesn't matter. The loyalty program has done its job. You have received something for being loyal and for many of you those miles and points came from everyday actions you needed to complete any ways, so you might as well be rewarded. Doesn't matter if you got 0.5 cents back on each dollar you spent or 2 cents back. Whatever what works for you. So please don't be swayed by someone saying you shouldn't redeem for that or be disappointed if you did and are chastised for it. You got a reward and you were happy with it. Good for you. It saved you money and left you with cash that you can use towards something else. That is the true value in a reward redemption.

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Are you points maximizer or take solace in redeeming for any type of reward? How do you value your reward redemptions? Tell us in the comments section below or join the conversation on Facebook and Twitter!

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