Brock Debenham

Yesterday I booked our flights to Michigan for Mel and Matt’s wedding in October.  The flights, had I not used reward points, would have been $1732 CAD after taxes for two return tickets.  I had to use 50,000 points, plus $90 CAD in taxes for the 2 tickets.

I used to only collect AirMiles.  However, I found it incredibly difficult to book any flights with AirMiles, and, you had to pay a large booking fee and all the taxes, which usually worked out to be at least $150 per ticket.  Plus, they don’t allow you to fly to a number of smaller airports in the USA, and, sometimes those are the airports that I want to go with.

A couple of years ago I started collecting Starwood points using my MBNA Mastercard.  Starwood is a hotel company that owns hotel brands such as the Westin, Sheraton, St. Regis, W, etc.  You can use your points to book rooms with their brands, but you can also transfer your points to various airlines, including Air Canada, Northwest, Delta, and a number of others, usually at a 1:1 basis.  Plus, for every 20,000 miles you transfer, they give you a bonus of 5,000 extra points.

So what does this all work out to as a percentage of your purchases?  Well, let’s say you sign up for a MBNA SPG credit card.  The first time you use it, you get 5,000 bonus points right off the bat. 

Now, let’s do scenario one, where you spend generally less than $10,000 per year on your credit card.  So, in this scenario, you receive 1 point for every 2 dollars you spend.  So, to get 50,000 points (the number of points for the 2 flights that I booked), you need to spend the following amount:

5,000 points — Free from first purchase (say you bank these for a hotel room purchase)
+40,000 points from $80,000 in spending
+ 10,000 bonus points when you transfer 40,000 points to your NWA frequent flyer account
= 50,000 points needed for the tickets

So, you spent $80,000 in a couple of years, so the percentage return back on your flight bookings is:

(1732 – 90 in taxes)/80,000 = 2.05 percent return on your credit card spending + 5,000 points still stored in your account

Now, let’s say in scenario 2 that you do a lot of credit card spending in your family, around $35,000 per year.  In this case, for every $10,000 you spend on your card, you get an extra 5,000 bonus points, to a maximum of 15,000 bonus points per year.  So, essentially, you get 1 point for every dollar spent up to $30,000.  In this scenario, it breaks down as follows:

5,000 points = Free with first purchase
15,000 points = $30,000 worth of spending
15,000 points = Bonus points on your $30,000 worth of spending
5,000 points = Extra $10,000 in spending throughout the year
= 40,000 points
+ 10,000 points = Extra 10,000 points when you transfer your 40,000 points to NWA frequent flyer
= 50,000 points total

In this scenario, your return on your credit card spending is = $1642/ $40,000 = 4.1%

Most no fee reward credit cards in Canada offer a 1% return.  So, if you plan it right, you can earn up to 4.1% return on your purchases, paying no extra annual fees at all.

Anyone else have any credit cards that I haven’t heard about that can provide these kinds of returns?