How credit card travel rewards beat cashback

In the lockdown phase of the COVID-19 pandemic, the sensible thing to do with your credit-card rewards was to switch to cashback from travel points. The public-health challenge still lingers, but an easing of restrictions has now led to a travel boom.

For some help in getting up to speed on the latest developments in travel rewards, check out this e-mail Q&A I did with Barry Choi. Mr. Choi blogs at Money We Have, and he’s a top expert on travel and reward programs.

Some travel-reward programs are moving to a dynamic pricing model – can you give us some examples and an explanation of what this means for points redemptions?

Aeroplan and Marriott Bonvoy switched to fully dynamic pricing, and Air Miles is doing it, too. That’s where the number of points required for redemptions will depend on supply and demand. More popular flights, hotels and times will cost you more points than those that have less interest.

From a consumer’s perspective, you just need to study the programs to see where you benefit the most. For example, with Aeroplan, switching your date or time of the flight could save you a fair amount of points. Aeroplan also has a fixed redemption chart for partner airlines, where the number of points required for a flight is significantly lower than the high end of dynamic pricing on Air Canada flights.

Cashback rewards were popular during the pandemic lockdowns – how do you compare the value from cashback as opposed to travel rewards, where you use points for flights, hotels and such?

You need to establish a base price for your points first. To do this, you would take the cash price of your redemption and then subtract any taxes you need to pay when using points. You would multiply that number by 100 and then divide it by the number of points required for the redemption.

For example, let’s say you’re considering a round-trip flight on Aeroplan from Toronto to Los Angeles. The cash price is $600 or 25,000 Aeroplan points plus $50 in taxes. The formula you would use is as follows: ($600 minus $50) times 100 divided by 25,000 = 2.2 cents per point. Most travel loyalty experts value one Aeroplan point at two cents, so the above example represents excellent value. If the value of your redemption is less than the average accepted value, you’re better off paying cash.

Now let’s say you’re debating between a cashback or travel-rewards credit card. A cashback card that gives you 2 per cent back on groceries may seem more appealing than an Aeroplan credit card that gives you 1.5 points per $1 spent. However, when you factor in the value of your travel-rewards points, the Aeroplan card would actually come out ahead. Travel credit cards also often come with additional benefits such as airport lounge access, free checked bags and travel insurance. You won’t get that with a cashback card.

Aeroplan has refreshed its frequent-flyer program and has been signing up new retail partners. What’s your take on Aeroplan’s standing among customer-loyalty programs?

To simply put it, Aeroplan is crushing it. They’ve added more retail and airline partners in the last few years. They’ve made earning and retaining status easier during the pandemic and they’ve had flexible change policies. Many people who collect travel-rewards points would argue that Aeroplan is the best airline loyalty program available.

What are you noticing in reward credit-card welcome offers for new clients?

The current welcome bonuses aren’t nearly as rich as some of the offers from earlier in the year. That said, American Express continues to have some of the most generous sign-up bonuses on the market. A few credit card issuers have been trying out new strategies to retain customers. Instead of offering the full bonus after you reach the minimum spend requirement, they now require you to spend a set amount every month for a few months. This has obviously been implemented to try and get people to continue to use their cards instead of stopping after they get their welcome offer.

What are your personal favourite loyalty programs?

Aeroplan will always be my top travel loyalty program since they’re the most flexible when it comes to earning and burning points. This year alone, I’ve earned more than 500,000 Aeroplan points and have booked business-class flights on points to London, Bangkok, Los Angeles and Orlando. American Express Membership Rewards is my favourite bank travel-rewards program. Unlike other bank loyalty programs, you can redeem your points for a statement credit at the same value as travel redemptions. You can also transfer your points to Aeroplan and Marriott Bonvoy, which could increase the value of your points. One nontravel loyalty program I’m a huge fan of is PC Optimum.

Subscribe to Carrick on Money

Are you reading this newsletter on the web or did someone forward the e-mail version to you? If so, you can sign up for Carrick on Money here.

Rob’s personal finance reading list

What inflation says about starting CPP

This article from a website for advisers looks at the impact of rising inflation on the decision about whether to delay the start of Canada Pension Plan retirement benefits past age 65.

The mega-cheap kitchen refresh

Ideas for organizing your kitchen taken from Airbnbs around the world.

Switching jobs pays dividends

A study shows that workers who switch jobs are more likely to receive a salary boost than those who keep their existing jobs.

Razor Logic

Shaving foam, gel, shaving cream – I will continue to buy whatever’s cheapest, having never thought twice about it. But here’s some info saying that shaving cream, potentially the most expensive option, is apparently the best.

Today’s financial tool

Soaring grocery prices are a big reason why the inflation rate is so high. These 17 grocery apps can help you find the cheapest prices for the items on your shopping list.

The money-free zone

The 50 best songs of 1972. What a year for music – Aretha Franklin, Lou Reed, Steely Dan, Bill Withers, Gordon Lightfoot and way more.


  • Advice from this retiree: “If you’re healthy enough and have the finances, go travelling as soon as possible”
  • For my first car I want an EV or PHEV. Is there one at my $35,000 budget?
  • Sales in Ontario’s cottage country have slowed, but the rental market remains strong

More Rob Carrick and money coverage

Subscribe to Stress Test on Apple podcasts or Spotify. For more money stories, follow me on Instagram and Twitter, and join the discussion on my Facebook page. Millennial readers, join our Gen Y Money Facebook group.

Even more coverage from Rob Carrick: – H6

Are you reading this newsletter on the web or did someone forward the e-mail version to you? If so, you can sign up for Carrick on Money here.

Related Posts