Why I think an Aeroplan mile/point is worth 1.6 cents and if you should collect them with a credit card.
Aeroplan points, Air miles, HBC points, PetroPoints, etc, etc, all the way back to Club Z Points at Zellers. They seem like such a gimmick and just a way to influence your spending. The thing is, they are everywhere now and you can’t really avoid it, so you might as well take advantage of it. I have calculated how much I think they are worth so read on.
I personally collect Air Miles and Aeroplan Points so I just talk about those. This posting is about Aeroplan Points specifically, but the same techniques can be used to figure out Air Miles. You can read these related articles…
- Collecting Air Miles and their Value
- Air Miles Versus Aeroplan Points
- Scotia Bank No Fee Money Back Visa Card Review
- TD Travel Visas
Note: I interchange the word points and miles throughout this article. They mean the same thing. An Aeroplan Point and an Aeroplan Mile are the same.
To calculate the value of an Aeroplan point I priced out a flight on their website using points and then priced out a similar flight the same day using Air Canada’s website. From that, I determined an Aeroplan point is worth 1.6 cents/point. I will explain later how I came to this.
How to Collect Aeroplan Points
Aeroplan, first of all, is free and there are three different ways to collect.
- You can apply for an Aeroplan card and just keep it on you. If you shop at stores that are affiliated with them (Future Shop, Esso, etc) then you just hand them your card and you collect some points whenever you purchase something.
- You use it whenever you fly with Air Canada or some other Star Alliance member airline. You will receive a certain number of Aeroplan points whenever you fly somewhere. This is free as well.
- You apply for a CIBC Aeroplan VISA card. There is a fee for these cards. $29/year will give you the CIBC AeroClassic VISA card that will give you 1 point for every $2 you put on the card. $120/year will give you a CIBC AeroGold VISA card that will give you 1.5 points for every $1 you spend on it.
- Apply for an American Express Aeroplan credit card
- Apply for one of the many other credit cards that offer Aeroplan points as well
So you may get aeroplan miles on any purchase if you use your Visa and at Aeroplan affiliates you can “double dip” by collecting Aeroplan miles using your Aeropan card that they give you and paying for your actual purchase with your credit card and getting aeroplan miles from CIBC.
These points can later be used to buy flights, car rentals, hotels rooms, and a few other products. With flights and car rentals you will still have to pay the taxes, but the base fees are covered by the Aeroplan points.
So this is the basics of the system. Now I will discuss what they are actually worth.
What is Value of an Aeroplan Mile? (How I Figure Out How Much They Are Worth)
This is an interesting question. Basically, I went through the steps of booking a flight through Aeroplan and through the Air Canada website from Calgary to Victoria.
The cheapest price I could find for the flight was $321.54 including taxes (this was with the no baggage and other deduction options). With Aeroplan, it was 15,000 Aeroplan miles plus I had to pay $78.80 for taxes and other fees.
So I can assume my 15,000 Aeroplan miles were worth $242.74 (the difference in money out of my pocket). This means one Aeroplan mile is worth around 1.6 cents.
Note: Other products/rewards require more or less Aeroplan miles, which can make them worth more or less money than 1.6 cents/aeroplan point.
Basically, my advice is to check out how much money you “actually” save by using Aeroplan miles to purchase something and how many Aeroplan points it takes and plug it into this formula:
Aeroplan Miles Value = Money Saved / Aeroplan Miles Used
Should I Get a Aeroplan Visa Card or Upgrade My Existing One?
Should you pay the annual fee to get Aeroplan Miles? This depends on how much money you spend on your credit card and what you will use your miles for. The more you spend, the more likely an upgrade will be a good thing.
Now that we did our calculations above to see what an aeroplan point is worth we can figure this out. Ask yourself what you want to use it for. For me, it is flights.
I will show you whether you should upgrade for the flight example I did above. To calculate this I made a formula that took into account the annual fee and what the value of an aeroplan mile is to figure out how much money you would need to spend to at least recover the annual fee in aeroplan miles value. The formula for getting the $29 basic card is 58 / Aeroplan Miles Value. The formula for the $120 gold card is 80 / Aeroplan Miles Value. If you want to see how I figured these out, send me an email and I’ll send you the proofs.
For example, if I value an Aeroplan mile at 1.6 cents, this is the formula:
58 / 0.016 = $3625
80 / 0.016 = $5000
This means that I would need to put $3625/year on my AeroClassic Visa card to make it worth the fee and $5000/year to upgrade to the AeroGold Visa card. Once you have spent those amounts, the extra aeroplan miles you have earned are valued at the same amount as the fee you have paid.
Note: If the value you get from an Aeroplan mile is greater than 1.6 cents/mile, the amount you need to spend goes down. Just plug the value into the formula and you will see. Hotels, car rentals, vacations, etc might be a better deal.
This isn’t the whole story either. There are other perks to these cards that I have not talked about. The AeroGold has better options for flights and other advantages so you should actually read up on it yourself. Sometimes there will be a feature to the card that will outweight the value I am talking about here (lower interest rate, other discounts, insurance coverage, etc.)