Is it Worth Collecting Reward Points?
We can all agree that Canadians love their reward credit cards. From travel rewards to cash-back, it’s never been easier to earn something back by charging your everyday purchases to your credit cards.
However, over the years, many of the best credit cards in Canada have changed. Some of the programs have been devalued while some cards have added benefits which makes things better for consumers. Instead of keeping up with all these changes, some people have opted to go the cash-back route. But is it still worth collecting reward points?
What kind of rewards do you like earn?
First off, you need to determine what kind of rewards program do you like. Travel rewards are the most popular option, but many of the best cash back credit cards also offer you discounts on gas and groceries.
With travel rewards, you need to determine if you prefer hotel points or airline rewards. You also need to consider the brands that you’re loyal to. Air Canada has Aeroplan points, however, Air Canada said they will be pulling out of that program in 2020. Hotel points offer a good return, but if you don’t like staying at hotels, why bother collecting their points?
How easy is it to claim your points?
Every rewards program has different rules when it comes to redeeming points. Cash-back programs are the easiest to understand since you’re essentially earning a fixed amount for every purchase you make. The only thing you really need to worry about are the different multipliers that allow you to earn more points depending on the category that you’re spending money on.
With travel rewards, things can be a bit more complicated. The BMO World Elite MasterCard allows you to claim rewards for any type of travel that you charge to your card. However, if you collect Aeroplan points, there are set restrictions and blackout dates. Having maximum flexibility is always better, but there can sometimes be good value with fixed mileage programs.
What are your spending patterns like?
Generally speaking, rewards points are worth roughly 1-5% of your purchases. This is a good return, but are you spending more money just to earn those points? It’s been proven that people spend more money when using credit over cash. If you’re spending 10% more just to earn 5% in rewards, well that’s not a good deal at all.
There’s also the interest rate to consider. The average credit card interest rate is 19.99%. It doesn’t matter how many rewards you’re earning, if you’re paying that much in interest, you’ll never come out ahead.
Additional benefits to consider
Although it’s not technically part of the rewards program, the additional benefits you get by having a rewards credit card can’t be ignored. Most premium travel rewards credit cards come with a comprehensive insurance package. That could include flight delay/cancellation, lost/delayed luggage, and travel medical insurance. Those benefits alone could be worth a few hundred dollars alone.
Many cards also come with car rental insurance, purchase assurance, price protection, and much more. Even if you’re not into rewards points, there’s no denying that these additional benefits can be rather valuable.
The final word
Is it worth collecting reward points? Yes, of course, but only if you’re paying off the full balance every month. Just be sure to select a rewards program that lines up with the type of rewards you like and your overall spending habits.
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