Why I think an airmile can be worth anywhere between 13 cents and 44 cents depending on what you use it for.
Air miles, Aeroplan points, 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 Air Miles specifically, but the same techniques can be used to figure out Aeroplan. You can read these related articles…
- Collecting Aeroplan Points and their Value
- Air Miles Versus Aeroplan Points
- Scotia Bank No Fee Money Back Visa Card Review
- TD Travel Visas
Basically, I value an airmile differently depending on the product. Here is my summary.
- Entertainment gifts are about 40 cents/airmile.
- Travel is around 20 cents/airmile.
- Gift cards are around 10 cents/airmile.
So when you see those “double your airmiles when you buy this…” deals, you can add up how much you are going to spend and how many airmiles you will get and see if it will actually pay for yourself. Unless of course you actually need what you are buying, then it doesn’t matter.
How to Collect Air Miles
Air Miles, first of all, is free and there are three different ways to collect.
- You can apply for the blue Air Miles card and just keep it on you. If you shop at stores that are affiliated with them (Shell, SportChek, Turbo, Boston Pizza, Safeway, Rona, etc) then you just hand them your card and you collect some points.
- If you have the blue Air Miles card then you can also earn points buy purchasing on-line through the retailer links at airmilesshops.ca using your collector number. Read more on it at Book Through AirMilesShops For More Air Miles.
- You apply for a no fee BMO Mosaik Mastercard and link it to your Air Miles card you got above. They will give you 1 AirMile for every $40 you spend on their credit card. For a yearly fee you can increase the AirMiles you earn. You will get 1 for every $20 you spend for $35/year (the silver card), or you get 1 for every $15 you spend for $80/year (the gold card). The card upgrades can also give you some cheaper AirMile rates on flights.
- You apply for a no fee American Express card and link it to your Air Miles card you got above. They will give you 1 AirMile for every $20 you spend on the card. This is way better than the Mosaik card above (there 1 for 20 card is $35/year), but you cannot upgrade this one any further. You don’t get any special rates on flights either.
So you may get airmiles on any purchase if you use your Mastercard/Amex and at AirMile affiliates you can “double dip” by collecting airmiles using your blue card that they give you and paying for your actual purchase with your credit card and getting airmiles from BMO.
These points can later be used to buy flights, car rentals, gift cards, tickets, electronics, and a variety of other products. With flights and car rentals you will still have to pay the taxes, but the base fees are covered by the air miles.
So this is the basics of the system. Now I will discuss what they are actually worth.
What is the Best Value for My Airmiles? (How I Figure Out How Much They Are Worth)
This is an interesting question. This tells you what your airmiles are worth. I decided to investigate this. Basically, I looked at how many airmiles it took to purchase something and divided it into the cost of the item. This gave me the cents per airmile they were good for. There is a large difference depending on what you buy with them.
For example, I will compare 3 items for you right now. I’ll list the value you save, the airmiles it takes, and the value of each airmile for that item. I priced out a round trip flight from Calgary to Victoria, a Starbucks gift card, and 2 for 1 movie coupon.
- A flight from Calgary to Victoria on Westjet. This is an approximate savings for the flight I found.
- Money Saved: $181 (this can be higher)
- Air Miles Used: 800 (A discount because I’m a gold card member)
- Air Miles Value: 23 cents/air mile
- A $25 Starbucks Gift Card.
- Money saved: $25
- Air Miles Used: 200
- Air Miles Value: 13 cents/air mile
- A 2 for 1 movie pass.
- Money Saved: $11 (move ticket in my city)
- Air Miles Used: 25
- Air Miles Value: 44 cents/air mile
So you save the most money on movies, then the flight, then the starbucks card. Now don’t run out and use your air miles for as many movie passes as you can buy. The problem here is, what do you want to buy with them? Not everyone wants to go to the theatre all the time. This is just to keep aware of what kind of value you are getting.
A couple years ago, my future wife was living in Victoria and I was in Calgary. Oil prices were still low and flights were really cheap. If we waited for seat sales to see each other on the weekends, I priced out my airmiles were only worth 8 cents each. So I just shelled out the money for my plane tickets and used my air miles for something else.
Basically, my advice is to check out how much money you “actually” save by using air miles to purchase something and how many airmiles it takes and plug it into this formula:
Air Miles Value = Money Saved / Air Miles Used
Should I Upgrade my Mosaik Mastercard?
Should you pay the annual fee to get more Air 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.
Update (March 22, 2007): American Express offers a no fees card that pays out 1 AirMile for every $20. This is better than the Basic and Silver card. The only question is whether you should go for the Amex or the Gold Mastercard. If you don’t care whether you have an AMEX or Mastercard then read the section below called Should I Get a Gold Mosaik Card or an American Express. There is an update below regarding how to choose.
Now that we did our calculations above to see what an airmile is worth we can figure this out. Ask yourself what you want to use it for. For me, it is flights.
Upgrading Between the Mosaik Cards
If you do not want the American Express then here is the reasoning behind upgrading the Mosaik cards.
I will show you whether you should upgrade for each of the 3 examples I did above. To calculate this I made a formula that took into account the annual fee and what the value of an airmile is to figure out how much money you would need to spend to at least recover the annual fee in extra airmiles value. The formula for upgrading to the silver card is 1400 / Air Miles Value. The formula for the gold card is 1920 / Air 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 air mile at 20 cents, this is the formula:
1400 / 0.20 = $7000
1920 / 0.20 = $9600
This means that I would need to put $7000/year on my Mosaik card to make it worth the fee to upgrade to the Silver card and $9600/year to upgrade to the Gold card.
For the examples I list above here are the results:
Minimum Spending Amounts Based on Reward Types
|Item||Value per Air Mile||Silver Card||Gold Card|
|2 for 1 Movie Pass||$0.44||$3182||$4364|
Should I Get a Gold Mosaik Card or an American Express?
Updated March 22, 2007
This is an update to this article since I have looked at the American Express. This card pays you 1 Airmile for every $20 and has no fees. So it is not even a comparison to the Basic and Silver Mosaik cards, the Amex beats them hands down. However, the Gold card will pay you more miles if you put enough money on it.
The formula is $MoneySpent = 4800 / AirmileValue
So depending on how you value an airmile, the amount of money you need to spend to make the Gold card worth your while is shown in the table below. Remember you have to make enough extra miles to cover the $80 yearly fee you have paid.
Minimum Spending Amounts Based on Reward Types for Amex to Gold Card
|Item||Value per Air Mile||Gold Card|
|2 for 1 Movie Pass||$0.44||$10,909|
Wow, that is some serious coin you need to be putting down now. Unless you own a business and are putting your expenses on it, the Amex is probably the better bet.
Bottom line: The more value you get from your air miles, the less you have to put on your card to make it worthwhile for the upgrade. So if you are using all your airmiles on Starbucks gift cards, you will have to spend a lot on your credit card before you should think about upgrading.
If you are using the Amex, you can’t upgrade anyways so it doesn’t matter. UPDATE: There is a platinum Amex available now as well as Aeroplan earning cards. I will evaluate them at a later date. If you are not putting on at least the amounts I mention above to make the Gold card upgrade worth your while for the Mosaik card, you should just stick the American Express one. And based on the values, it looks the Amex is the best bet. The only question is how often you will be able to use it since it isn’t as widely accepted.