Don't Settle for 1 Cent Per Point

It frustrates me when I hear people talk about the points that they are collecting with their credit cards are the wrong ones.

What do I mean by that?

Well, after spending easily a decade collecting RBC Rewards points, which I then just used to pay my credit card off, at a 1 cent per point conversion, I learnt there are way better credit cards and way better ways to use the points you accumulate on those credit cards.

For example, if I earned 210,000 points in one month using my RBC VISA Infinite credit card, I would turn around and convert those to dollars, to pay down my credit card, which would be worth only $2,100 (1 cent per point x 210,000 points).

Now, to most, 1 cent per point is great, but lets put it this way, I recently booked a business class flight for the 3 LYLE Travelers from Detroit DTW to Madrid (with a layover in Frankfurt), which would've cost me $13,131, for just 210,000 Aeroplan points + $233.40 in fees.

This works out to me achieving just over 6 cents per point ($13,310 + $233.40/210,000).

So think about that, if I had 210,000 RBC Reward points, it gets me $2,100 cash OR if I have 210,000 Aeroplan points, it gets us a flight with a cash value of $13,131!

Hmmmm, I think we all know what the better option is.

But let me give you some more examples on why you are probably using the wrong credit card.

Lets start with the cash back credit cards, such as the CIBC Dividend Visa Infinite credit card, which gets you 4% cash back.

Now, this sounds almost as good as my favourite credit card, the American Express' Cobalt credit card, which offers 5x points per dollar spent at restaurants and grocery stores.

However, you can take those 5 American Express Membership Reward (MR) points you made per dollar spent and convert them to Aeroplan points at a 1:1 ratio, and book flights to almost anywhere in the world.

Back to our earlier example, as I said, we recently booked 3 business class seats to Spain using ONLY 210K Aeroplan points + $233.40 in fees (I converted my American Express MR Points to Aeroplan).

As I mentioned, this would've cost us $13,131 CAD if we paid cash. This results in my points being worth just over 6 cents per point ($13,310+ $233.40/210,000).

What does that mean?

In simplest terms:

For every point I get, we can assume it's worth 6 cents (or even more sometimes).

AND for every dollar I spend, I get 5 points!

Which means, for every $1 spent, we actually get 30% cash back ($.06 cents/pt x 5 points for every $1 dollar I spend)!

Destroying that 4% cash back card.

Lets break this down even more.

To accumulate the 210K points we needed for the business class flights to Spain using our Amex Cobalt credit card, we needed to spend $42K. (Every $1 we spend, we get 5 Amex MR points: $42,000 x 5 = 210,000).

Now yes, that seems like a lot of money to spend, however, you know how much you'd have to spend on your 4% Cash back credit card to generate the $13,131 needed for business class flights to Spain?

$328,275!!!! (For every $1 dollar you spend, you get only $.04 cents).

$1 = $0.04 cents

$10 = $0.40 cents,

$100 = $4

$1,000 = $40

$10,000 = $400

$100,000 = $4,000

$328,275 = $13,131

Now you might be thinking, OK, maybe cash back credit cards aren't the best, but my TD First Class Travel VISA Infinite Credit Card gives me 6x TD Reward Points per $1 spent on groceries and restaurants. That's even better then American Express's Cobalt's 5x Membership Reward Points on groceries and restaurants, right?

WRONG!

The main reason is TD Reward Points can't be converted to airline points such as Aeroplan or Air France, or to hotel points such as Marriott Bonvoy or Hilton, or even other airlines or hotels (full list here). So you are stuck redeeming your TD Reward Points in their Expedia travel portal, or converting your points for trips booked at any travel site with Book Any Way Travel, but ONLY getting up to a 1/2 cent per point when converted (read here for a good breakdown)

This is a terrible use of points, and would mean you would need to spend $437,700 CAD to accumulate enough TD Reward Points to book the same business class flights we booked with our Aeroplan points to Spain that cost $13,310 CAD.

How?

Well, TD Reward points convert at 200 points = 1 CAD dollar when booking via book any-way travel.

$1 = 200 points

$10 = 2,000 points

$100 = 20,000 points

$1,000 = 200,000 points

$10,000 = 2,000,000 points.

$13,131 = 2,626,200 points

To get that many points using your TD First Class Travel® Visa Infinite* Card, you would need to then spend as I said previously, $437,700 at grocery stores and restaurants ($437,700 x 6x the points/$ spent = 2,626,200).

Ya, that ain't gonna happen!

My advice... throw away all your cash back and bank points currency credit cards RIGHT NOW, and get an American Express credit card, starting with the American Express Cobalt credit card!

What do you think about that!?