Many of us (including myself) praise consumer reward programs – they make our money last longer, give us more for our money. Traditionally reward programs like Aeroplan and Air Miles have been very popular but lately cash back is gaining in popularity for its simplicity.
Whatever reward program you prefer, there are certain situations when reward programs don’t make sense.
When They Change Your Spending
The best type of reward program is something that maximizes your rewards and fits well into your current spending profile.
A reward program doesn’t make sense when it changes your spending so that you can collect more rewards.
For example, if you shop for groceries at a discount grocery store but switch to a higher priced grocery store to collect rewards like Air Miles, the rewards you collect are likely cancelled out by the higher prices you pay for groceries.
There’s nothing wrong with collecting as many rewards as you can – we all love to do it. But changing your spending habits for the sole purpose of getting more rewards doesn’t make sense and may end up costing you more in the long run.
If you spend $200 you may be able to collect 200 Air Miles, but is it really worth it if you don’t need all the groceries?
When The Hidden Fees Aren’t Considered
All reward programs allow consumers to collect rewards for everyday purchases, but they usually come with a cost.
The Capital One Aspire Travel World Mastercard has an annual fee of $120. Air Miles used on flights require the traveller to pay the taxes and fees for the associated flight.
Related: 5 Golden Rules for Credit Cards
Even the Scotiabank Momentum Visa Infinite card which I love (and use often) has an annual fee of $99.
All of these cost need to be considered when looking at which reward program is best for you.
When They Restrict Your Spending
Another example of when a rewards program doesn’t make sense is when it restricts your spending to a certain company.
Westjet offers a competitive RBC World Elite Mastercard but the only drawback is that all of the rewards are based on you flying only with Westjet. It’s great that it offers free checked bags and 1.5% back on all purchases but it forces you to fly only with Westjet. There’s no point in collecting rewards for Westjet flights if you can fly for cheaper with another airline.
Shell gas stations are handy for collecting Air Miles, but there’s no sense in collecting them if gas prices are cheaper elsewhere.
Finding the cheapest price is the simplest form of rewards and most people forget about it because companies want you to stay loyal, even if it means you’re overpaying for the items you are buying. Saving money by finding the lowest price is a rewards program many companies don’t want you to follow.
Conclusion: whether you’re collecting reward points while overspending on groceries or retaining a rewards credit card with high fees that you barely use, there are some cases where rewards programs don’t make sense. I think everyone should review their own spending to see which rewards programs make the most sense for them. There’s no sense in collecting rewards when you stand to lose money through hidden fees or overspending.
Which rewards programs do you use (or avoid)?