How to Maximize Rewards and Save Money
The typical Canadian has over half a dozen rewards cards in their wallet at any given time. It seems like every retailer (large or small) has their own rewards card and loyalty program, along with incentives to save money if you join. So how do you know if you’re truly maximizing rewards and saving money?
You should do a quick review of your spending habits to determine which loyalty programs offer the best value for your situation. Let’s take a look at 3 typical Canadian families and try to help them maximize rewards and save money.
Family #1: Newlyweds on a Budget
Todd and Tracy are newlyweds and their budget is stretched to the limit. The good news is they have no consumer debt and have using a budget to track their spending habits. Todd earns $50,000 a year as a sales manager, and Tracy earns $25,000 a year as an administrative assistant. They do their grocery shopping at a nearby Safeway, and try to time their big monthly shop around Customer Appreciation Day where they can earn bonus Air Miles or 15 percent off their groceries. Their monthly spending outside of housing costs is approximately $1,500.
- Loyalty Program – Air Miles is one of the most popular loyalty programs in Canada, with over 10 million active collectors across the country. Since Todd and Tracy already shop regularly at Safeway, spending roughly $500 per month on groceries, they should be using an Air Miles card to earn rewards. By shopping wisely and taking advantage of bonus Air Miles at Safeway and other sponsors they could earn around 100 Air Miles each month. That may not sound like a lot, but over a year those Air Miles can be redeemed for seven nights out at the movies, or $140 in gas gift cards from Shell.
- Credit Card – A no annual fee, cash back reward credit cards like the MBNA Smart Cash Credit Card is perfect for a family on a budget. No points to redeem, no travel miles to save up, just straight cash back. This credit card offers 3% cash back on the first $600 spent on groceries and gas each month, and 1% cash back on all other purchases with no maximum limit. By using the MBNA Smart Cash Credit Card for all of their monthly purchases, Todd and Tracy can earn rebates of close to $30 each month. That’s $360 cash back in their wallet each year.
Family #2: Single Income Family with Two Kids
John and Sarah have been happily married for 5 years and have a three-year old son and a two-month old daughter. While Sarah stays home and looks after the kids, John is an engineer earning $100,000 a year who commutes 90 minutes each way from their suburb home to the city. Once a month, John has to fly to the company head office for meetings. They prefer a one-stop shop where they can pick up their baby supplies, groceries and clothing at the same time. Their combined monthly spending outside of housing costs is approximately $2,500.
- Loyalty Program – Aeroplan is one of Canada’s most popular loyalty programs and members can earn Aeroplan Miles at over 75 sponsors. John can earn points on his monthly flights with Air Canada, on his frequent fill-ups at Esso, and at Home Hardware when working on the next home reno project. John and Sarah can redeem their Aeroplan reward miles for products like Toys R Us gift cards for the kids, or for a weekend flight to Las Vegas.
- Credit Card – The PC Mastercard has no annual fee and cardholders can earn a 1% rebate on any purchase. The rebate comes in the form of PC Optimum Points, which are redeemable at any President’s Choice location. This no hassle rewards credit card will earn John and Sarah up to $25 per month, which they can redeem for free groceries or baby supplies.
Family #3: Double Income, No Kids
David and Cindy are both in corporate sales and they love to travel whenever they get the chance. Their combined income is over $150,000 a year and they easily spend in excess of $4,000 a month outside of their housing costs.
- Loyalty Program – WestJet offers a frequent guest program called WestJet dollars. This program is perfect for frequent fliers like David and Cindy. If you spend more than $1,500 a year flying with WestJet, you’ll earn 2.5% of your eligible spending in WestJet dollars that can be used like cash towards the purchase of WestJet flights. When your annual spend reaches $4,500 you’ll earn a free companion flight anywhere WestJet flies in Canada.
- Credit Card – The Capital One Aspire World Mastercard has long been known as the best travel rewards credit card in Canada. No matter where you use this card, you’ll always earn 2 reward miles for every dollar spent. With David and Cindy spending over $4,000 a month on their credit card they can earn nearly 100,000 reward miles plus an additional 35,000 bonus reward miles in the 1st year of signing up, and 10,000 reward miles each year on their anniversary. 100,000 miles can be redeemed for $1,000 in travel.
What Rewards Cards Are Right For You?
Remember that you need to match your rewards cards and loyalty programs to your spending habits in order to get the biggest bang for your buck. Utilize these cards for all your daily spending, from groceries and gas, to monthly bill payments, and watch the savings add up.
By using these tips you can maximize rewards and save money, or save up your points to take your dream vacation.
Comments
I would suggest Family #1 ditch the MNBA in favour of a BMO Mastercard, which gives you Air Miles with every purchase. I looooove mine! There’s a free option that gives you one Air Mile for every $35 spent, but I pay the annual fee (I think it’s $30) so I can get one mile for every $20 spent. It’s going to take me to Europe someday, I swear. I’ve already got enough Air Miles for a return trip anywhere in North America.
I’ve been collecting for about five years or so, but, admittedly, my monthly spending is NOT that high. If I was spending $1500 a month on stuff other than rent, I’m sure I’d have a lot more miles by now!
@ Melissa – if you want to go the Air Miles route, the Amex Air Miles offers 1 Air Mile for every $20 spent (no annual fee) and then with the annual fee of $50 it gives you 1 Air Mile for every $15 spent.
Still, Air Miles is tricky because it gives you the illusion that you are earning lots of rewards, but you need to understand how to convert them into dollars.
1 Air Mile is only worth about 11.5 cents (175 Air Miles can be redeemed for a $20 gift card).
The cash back card gives you more bang for your spending.
First of all, as a Canadian, I’m glad I found this site today through my new partnership with Yakezie.
Second, I was wondering if the Capital One card has a fee… these tend to take away from the returns.
Third, I’ve used a dividend card (free) for a while which pays me money for using the card… as long as I don’t pay interested, it becomes a passive income stream.
@ Doctor Stock – yes, the Capital One card does have an annual fee but if you spend considerably more than the average family then the rewards might be worth it. I would suggest you need to spend $30,000 a year to maximize rewards from that card.
Can you tell us more about your ‘dividend’ card?
Loved the post but am wondering how to figure out where I fit into this. I’m a young (mid-50’s) widow and have very little debt. I’ve moved from carrying quite a large balance on my one credit card to mostly paying it off monthly. I work full time and have benefits but only earn approximately $15,000/yr. I would like to put myself into one of these categories to find what credit card and loyalty/rewards program would best benefit me. I’ve tried looking at them and do use Air Miles but could use some help figuring that out. I also don’t have a pay back/rewards type credit card as I opted for a lower interest when I was carrying a large balance. I could really use some help in figuring out my best interest. I don’t have any children at home, you basically know the rest and I’d love to hear some tips and ideas.
Thanks
@ Mary – thanks for your comments. Let me first start off by saying you should continue to work hard and pay off your balance in full. That should be your number one priority before trying to choose a rewards credit card that suits your needs.
Once you have paid off your balance, only use your credit card to purchase your current month’s budget for food, gas, miscellaneous items, and then pay it off right away or at the end of the month.
Once you have that under control, maybe look into the Smart Cash MasterCard that pays you 3% cash back on your first $600 spent on groceries and gas. If you want to keep it really simple, try the PC Financial MasterCard.
Hi Robb,
Thanks for the reply. I know if I used the Smart Cash card, I could be sure to pay that off every month for the rewards of it but I just checked their website and I don’t make nearly enough a month to qualify. I was ok before I lost my husband a few years ago but this is just another thorn in the side…:-) Anyway, I’ll keep looking for something that makes it worthwhile to use.
I found this post very interesting. Choosing a credit card with a great reward program is ideal, but it is also important to make sure that the card maintains a low interest rate or you’ll end up getting yourself into trouble. Typically, when people have cards with great rewards, they use that card primarily to build up their points. If your interest rate is high, you can end up paying more than you’ve earned in your reward points and this makes the whole point of the card ineffective. I do agree that reward cards can be very beneficial you just might want to look at ways to make sure your are paying your credit cards in the most efficient manner.
@Vanessa – if people are interested in low interest rates because they carry a balance month-to-month, they should stay away from rewards cards.
People who maximize their points from rewards credit cards shouldn’t care about the interest rate because they should always pay their balance in full each month.
We collect Aeroplan and I must admit it has worked out great for us. We have gotten so many free flights over the last few years we have saved a ton on our vacations. We have been looking into switching to the Capital one Aspire card though. Seems like they may give even more points.