The Truth About Reward Points

Not all rewards are equal

The other day I heard a promotion on the radio. It was from one of the Air Miles participants and they offered 50 Air Miles with the purchase of some fancy lotion.

50 Air Miles sounds like a lot. Imagine if you had 50 of anything. Wow! Amazing... well, unfortunately for us, 50 Air Miles amounts to a little over $5.

As it stands, you need 95 Air Miles to redeem for $10 cash back*. Hmmm... so that 50 Air Mile offer really is approximately $5.26 off your next purchase... if you have the points for it.

Otherwise, it's really a method to get you to accumulate more points until you get 95. So how does one accumulate Air Miles? The minimum, last time I checked, was 1 Air Mile for each $20 you spend.

Ouch!

That means to get the other 45 points, you'll need to spend $900! So assuming you got the lotion for $15, you'll need to spend $885 to get $10 off. That's a little bit over 1% cash back.

Wifey read me an email she received last week. Shoppers was offering 18,500 Shoppers Optimum Points if you spent $75 in store! Wow! 18,500 is so much better than 50 right? In fact, doing so quick division indicates it should be 370 times better!

A quick visit to their website reveals that 18,500 points is about $23.13... so really only 4 times better.

Wait a minute... In the past, Shoppers offered $25 gift cards to various retailers (like Esso or Tim Hortons) if you spent $75 in store.

Well, if you redeem the points at their next tier, you can redeem 22,000 points for $30 off your purchase. At this level, your points are worth $25.23 instead of $23.13. The problem is, you'll still be short 3,500 points. So how would you accumulate these points? For every dollar you spend in store, you get 10 points.

That means you'll need to spend an additional $350 to get 3,500 points. In order to redeem $30, you'll need to spend $425. That becomes 7%. Not too bad considering. Problem is, how often does someone spend $75 or more at one time at Shoppers? Not wifey and I. At most, we spend $4 for milk or eggs. So really, our cash back is actually 1.25% (we get $10 back if we spend $800). This is only true if you use your points. With this tiered system, people would be tempted to "save" their points for more rewards.

The truth about rewards programs? They typically only give you partial rewards in hopes you'll continue shopping with them until you earn enough points to redeem for a reward. They call them loyalty programs for a reason.

Don't get me wrong, I don't dislike rewards programs. Some are useful. If you're going to be buying gas or groceries, you might as well collect some points in the process. It might take years before you have enough to redeem your points, but it's better than nothing.

It is also helpful to "double" your point collecting habit by using a rewards or cash back credit card. You need groceries anyway... might as well put it on a cash back credit card that returns you 2% of your purchase. Just make sure to pay off your credit card at the end of the billing cycle. That 19.99% interest doesn't make any cash back credit card worth it.

Also, be sure to read the fine print of any rewards program. A few years ago, Aeroplan had a clause in their program that required members to earn points at least once in a calendar year or else they would forfeit their points. Suffice it to say, wifey's points disappeared. There was another clause where points needed to be redeemed within 7 years or points earned would be forfeited. Well, after many news stories shedding light on this clause**, Aeroplan has since changed their terms.


*Back in 2009, they didn't have cash back, but you could redeem points for gift certificates from one grocery store. At the time, it was 120 points for a $20 gift certificate.

**There was a story or another of a family that saved points for years only to find out a lot of their points were forfeit a year earlier when they tried to book a free flight with their points. Ouch!