Is Aeroplan the Best Plan: Credit Card Comparison & Spending

Tuesday 27th, January 2015 / 14:27 Written by
Is Aeroplan the Best Plan: Credit Card Comparison & Spending
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This is an article in a multi part series on the different ways to earn Aeroplan miles

The Skinny

  • Aeroplan miles can be earned through credit card spending
  • Each purchase can only be put on 1 card
    • When you take a mile by swiping card A, this can be seen as “buying” that mile for the cost of what card B would have given you
  • Comparing cards, most Aeroplan cards give 1 Aeroplan mile / $ spent, with some cards giving 1.5 or 2 Aeroplan miles for certain category purchases
  • Some of my favorite cards give 2% in fixed value for all purchases, while others give up to 4% in fixed value for certain category purchases
  • Using the Toronto-Calgary economy flight comparison, fixed value cards such as the MBNA World Elite will likely give better value than Aeroplan cards

Overview

One of the most common ways to earn Aeroplan miles is through spending on a participating credit card. Any of these cards, for example, let you earn Aeroplan miles with each dollar that you spend:

  • TD Aeroplan Cards – allows you to directly earn Aeroplan Miles
  • American Express Aeroplan cards – allows you to directly earn Aeroplan miles
  • American Express Membership Rewards – allows you to earn AMEX membership rewards points, however, those can be converted to Aeroplan miles.

Here are some things to think about when considering the value of pursuing Aeroplan miles in this way.

Picking Your Payment Card: Aeroplan Vs. Other Rewards

First, when you buy something with a card, you only get to pay for it on one card. That means, if you’re paying for a purchase with an Aeroplan credit card, you’re gaining something, but you’re sacrificing something else. You’ve gained Aeroplan miles by making your purchase in this way, but you’ve given up your ability to earn any bonus from any other type of credit card you might have.

For example, if you have a different points or cash-back reward card, you’ve given up that reward in exchange for the Aeroplan miles. Therefore, you need to build a framework where you can evaluate whether or not using that Aeroplan card is actually the best option.

Assigning Value

I find that the best way to do this is to consider that you’re “buying” the Aeroplan miles. You’re essentially spending your points, cash or rewards from other cards in order to purchase the Aeroplan miles. Some of my favorite reward cards that I would have to compare to see if an Aeroplan card was really a good deal, include:

Credit Card Comparison

1% on all purchases 4% on gas and grocery purchases

Card Annual Fee Type of Points Earned Earning Rate
TD Aeroplan Visa Infinite $120 Aeroplan Miles 1 Aeroplan Mile / $ Spent
1.5 Aeroplan Mile / $ Spent for gas, grocery and drugstore
American Express AeroplanPlus Gold $120 Aeroplan Miles 1 Aeroplan Mile / $ Spent
1.25 Aeroplan Mile / $ Spent after $10,000 annual spend
American Express Gold $150 Membership Rewards
Transfer 1:1 to Aeroplan
1 Membership Reward / $ Spent
2 Membership Reward / $ Spent on travel, gas, grocery and drugstore
Scotiabank Amex $99 Fixed Value – Scotia Rewards 1% on all purchases
4% on restaurant, gas and grocery purchases
Scotiabank Momentum Visa $99 Cash Back 1% on all purchases 4% on gas and grocery purchases
MBNA World Elite $89 Fixed Value – MBNA World Points 2% on all purchases
BMO World Elite $150 Fixed Value – BMO Rewards 2% on all purchases
RBC Avion $120 RBC Rewards 1 RBC Reward / $ Spent
1.25 RBC Reward / $ Spent on travel

One of the easiest ways to make this comparison is by looking at a card that offers cash back. Let’s make our analysis using an MBNA World Elite Card.

Analysis

MBNA World Elite Card Bonus: 2% Cashback

Vs.

American Express AeroplanPus Gold Card Bonus: 1 Aeroplan Mile per dollar spent (first $10,000 / year), 1.25 Aeroplan Miles per dollar spent (any spending above $10,000 / year)

 

So, let’s compare using a purchase of $500. That would earn you either $10, or 500 Aeroplan miles.

Using the idea of “buying” your miles, you’ve just paid $10 for 500 Aeroplan miles. Whether or not that is good value for your money, remains to be seen. The key concept here is that you always need to consider what you sacrifice in order to make a gain.

Let’s look at the Toronto to Calgary round trip flight, discussed earlier, to see if this makes sense.

Toronto to Calgary Comparison

If we were to spend $20,000 in a year, using a 2% cash-back card, such as the MBNA World Elite or the BMO World Elite, we would get $400 towards this trip. That $400 represents 72% of the $550 that this trip would cost us.

If we were to put that $20,000 spending onto the AeroplanPlus Gold card, we would earn 22,500 Aeroplan miles (10,000 for the first $10,000 and 12,500 for the second $10,000). Since we know that 25,000 Aeroplan miles represents only 69% of the flight (from our previous analysis), these 22,500 miles would only represent 62% of the flight.

If you were interested in earning your reward as a Toronto-Calgary flight, then you would be better off putting that spending on the MBNA World Elite card instead of earning Aeroplan miles through your credit card spend.

Membership Point Transfer

The same concept of comparison should be applied if you’re thinking about doing a transfer of your membership rewards points. As I mentioned earlier, you can transfer American Express Membership Rewards points to Aeroplan miles.

Always evaluate the value you’re getting before transferring points. That is the only way to tell whether or not that is the best way to use those membership rewards points. This is especially important when you have options. In this case, you could transfer them to British Aireways Avios instead. You need to calculate whether you get the most value for your dollar with Aeroplan, or somewhere else.

Evaluating Rewards Cards

Somewhere in this equation you have to also think about how much Aeroplan miles are really worth when you try to put them into action. This should be a strong consideration when deciding if you should transfer them to another program instead.

In this case, I like to look at what other cards we could have used. Since the TD Aeroplan card is a premier card with a $120 fee, we can look at other cards that compare.

MBNA World Elite or BMO World Elite

Both the BMO World Elite and MBNA World Elite cards earn you 2 cents / dollar spent on all purchases.They are pretty much similar on the earnings side, so they get lumped in together for this analysis. The MBNA World Elite gives you the ability to take your points in the form of a rewards cheque and carries a $89 annual fee. The BMO World Elite requires your points be used towards travel booked through the BMO Rewards engine, comes with 4 lounge passes each year and better insurance benefits, but has a $150 annual fee.

If you are redeeming your Aeroplan miles at a rate of $0.015 each (as most people do), then you would be much better off taking the exact value from one of the World Elite cards and buying your flights with those points. It would take less spending on the BMO World Elite to accrue the same flight.

If you spend a significant amount of money on gas, grocery and drugstores, then you would earn slightly more value from the Aeroplan card (1.5 Aeroplan miles @ $0.015 each = $0.0225 return / dollar spent). You have to look at your spending profile to see what makes sense to you.

Scotiabank Gold American Express

The Scotiabank Gold American Express card earns 4% on gas, grocery and restaurants and 1% on everything else. These can be redeemed against a travel purchase. If you spend a significant amount of money in these categories, you are going to do much better with the Scotiabank American Express card. It isn’t even close. If your spending profile allows for this, and you use an average value for your Aeroplan miles, then the TD card simply doesn’t compete.

Conclusion

An offer of Aeroplan miles should not be a good enough reason to use a certain credit card when you make a purchase. You need to assign a value to the card that you use and the reward that you’re offered to decide if going after the Aeroplan miles is right for you.

An important factor is to evaluate your own spending profile. If you’re spending mostly on things like gas, grocery and restaurants, a card that focuses on those types of spending like the Scotiabank Gold American Express will provide you with much better value than the Aeroplan card.

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4 comments on “Is Aeroplan the Best Plan: Credit Card Comparison & Spending”

  1. Jo says:

    It is good if we can consider the 15,000 aeroplan signup bonus too.

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