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Know the value of your points.

To maximize the value of your loyalty points, you need to figure out the cents per point (CPP) first. To do this, you would use the following formula:

(Ticket price – taxes on redemption) X 100 / points required for a redemption

For example, a recent search for a one-way flight from Toronto to Vancouver on Air Canada showed a cash price of $326 when booking a basic fare. If booked on a standard Aeroplan reward, it would cost 14,200 Aeroplan points, plus $42. To figure out your CPP, your formula would look like this:

($326 – $42) X 100 / 14,200 = 2 CPP

By knowing the value of one point for each redemption, you can quickly compare the different options you’re considering. This is critical for programs that use dynamic pricing, such as Aeroplan and Marriott Bonvoy.

Dynamic pricing is a system where the price of an item changes based on supply and demand. In the case of points, the number of points required is based on supply and demand. More popular routes will cost you more points, whereas ones that see less demand will cost you fewer points.

Also note that you’ll want to have a base value for comparison purposes too. Most loyalty sites value Aeroplan at 2 CPP and Marriott Bonvoy at .9 CPP. What that means is that if you find a redemption worth at least that much, it’s a good value. If the redemption falls below that threshold, you might be better off saving your points.

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Understand your redemption options

If you collect loyalty points from a financial institution, you’ll have multiple redemption options such as travel rewards, gift cards, merchandise and more. Travel rewards will usually give you the most value, but it’s not always straightforward.

For example, it costs 1,000 Scene+ points to redeem $10 in travel. That’s a value of 1 CPP. With TD Rewards, it costs 200 TD Rewards points to redeem $1 in travel via Expedia.

There are also some programs that allow you to get even more value out of your points.

American Express gives you an option to double the value of your points if you book a flight via their Fixed Points Travel program. For example, you can book a short haul Canada/U.S. flight with a maximum base fare of $300 for 15,000 American Express Membership Rewards points. The 15,000 points are normally worth $150.

As you can see, the best value for your rewards typically lies in travel. Don’t use your points for gift cards, merchandise or a statement credit as they usually won’t be worth as much.

Look for the sweet spots

Every loyalty program has some sweet spots that can highly benefit you.

With Marriott Bonvoy, if you book four nights on points, you get the fifth night for free. In addition, Marriott Bonvoy allows you to get a full refund on your points as long as you cancel your room within 24 to 72 hours of your stay. That means you could monitor the price of your room and rebook it if the price drops to get some points back.

As for Aeroplan, the sweet spot comes with partner airlines since they use a fixed points program, as opposed to the dynamic pricing you find with Air Canada flights. If you’re able to find a reward seat on a partner airline, the points difference can be significant. Also, since Aeroplan uses a distance/zone rewards chart, there are a few natural routes that are favourable such as Toronto to New York and Vancouver to Tokyo.

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Earn those points fast

Knowing how to maximize your loyalty points is only useful if you have points to burn. Fortunately, there’s an easy way to earn points fast.

Just about every credit card gives a generous welcome bonus when you sign up. This signup offer is often worth much more than the annual fee you’d pay.

For example, the American Express Gold Rewards Card has an annual fee of $250, but it currently has a welcome bonus of 50,000 points when you charge $3,000 to your card in the first three months. In addition, you get an annual $100 travel credit and four Plaza Premium airport lounge passes.

That welcome bonus has a base value of $500, but if you transferred your points to Aeroplan, you could easily get a value of $1,000. The $100 annual travel credit effectively makes your annual fee $150 a year. As for the lounge passes, they have a value of about $40 each ($160 total).

If you are able to charge $3,000 to your card in the first three months, then you can easily recoup the card’s annual fee with the benefits provided.

Burning your points is just as important

Loyalty programs can devalue your points at any time.

For example, many loyalty programs have switched to dynamic pricing instead of a fixed points chart. The more popular a route, the more points it’ll cost you. While some routes may cost you fewer points, the odds are you’ll end up with a lower CPP for many flight and hotel rewards.

Even fixed points programs aren’t safe. In 2021, BMO changed its redemption schedule to 150 BMO Rewards points for $1 travel value, instead of 140 points.

Admittedly, these changes don’t happen frequently, but it’s always in your best interest to burn your points as soon as you can. Even if you can’t find a reward that’s above the base value, getting a free flight or hotel that’s slightly less valuable can still be worth it.

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About the Author

Barry Choi

Barry Choi

Moneywise Contributor

Barry Choi is a Toronto-based personal finance and travel expert who makes frequent media appearances. When he's not educating people on how to be smarter with money, he's earning and burning miles and points for luxury travel.

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