In the world of travel enthusiasts and savvy consumers, credit card rewards have become an essential and valuable currency, offering opportunities to turn everyday spending into dream vacations and luxury experiences. But what exactly is the secret behind maximizing these rewards? The answer lies in understanding and harnessing the power of leverage.
Leverage, in the context of credit card reward points, refers to the strategies to accumulate more points quickly and amplify the value of those points. It's about making your points work harder for you, ultimately enabling you to unlock greater rewards and experiences without necessarily increasing your spending. So, how does it work?
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1. Sign-Up Bonuses
One of the most effective ways to leverage credit card reward points is by taking advantage of sign-up bonuses (SUB). Most credit cards offer lucrative bonuses to new cardholders who meet a minimum spend requirement (MSR) within a specified time frame. The higher the bonus, generally the higher the MSR. By signing up for a credit card you are essentially committing to hold on to the card anywhere from 6-12 months or longer, so strategically applying for cards means doing a bit of research about which card you want to apply for and what a good SUB has been in the past. Since you will need to spend anywhere from $1000-$5000 or more within 3-6 months, you should also have a plan on how to meet the MSR.
2. Bonus Categories
Another key aspect of leverage is maximizing bonus categories. Various credit cards on the market offer points multipliers or higher earning rates for spending in specific categories such as dining, groceries, gas, or travel. By using the right credit card for each purchase and strategically allocating your spending to maximize bonus categories, you can earn points at an accelerated rate, increasing your overall rewards potential. Here are some examples of cards that have strong earning rates:
American Express Cobalt Card: 5x points on dining and groceries.
Scotiabank Gold American Express Card: 5x points on dining, groceries, and entertainment.
Scotia Momentum Visa Infinite Card provides 4% cash back on gas purchases.
3. Points Transfers
Some credit card reward programs (e.g. American Express) allows you to transfer points to partner airlines or hotel chains. Here is an example comparing two cards, spending the same amount of money with the end goal of earning Aeroplan points.
TD Aeroplan Visa Infinite Card vs. American Express Cobalt Card
Let's say they spend $10,000 on dining and groceries over the course of a year. Not factoring in SUBs.
TD Aeroplan Visa Infinite Card:
Earns 1.5 Aeroplan points per $1 spent on groceries and dining.
$10,000 spending on groceries and dining would earn 15,000 Aeroplan points.
American Express Cobalt Card:
Earns 5 Membership Rewards (MR) points per $1 spent on groceries and dining.
$10,000 spending on groceries and dining would earn 50,000 MR points.
Aeroplan is a points transfer partner with American Express, allowing them to transfer 1:1 ratio and receiving 50,000 Aeroplan points in exchange. So by strategically spending on bonus categories and utilizing transfer partners, they would be able to more than triple their earnings.
4. Points Redemption
Leverage also comes into play when it comes to redeeming your points. Just as 1 CAD is not the same as 1 USD, points currency values vary significantly based on the rewards or loyalty program. Of the many categories within miles & points programs, airline loyalty programs continue to offer the highest value for redemptions. It is not uncommon to see redemption values reaching 4-6 cents per point or higher. This is very different from reward programs like Scotia Scene+ where 1 point will always max out at 1 cent.
Much of what is being written about on miles & points blogs aim to demystify this part of the process, sharing redemption sweet spots, finding award availability, etc. If this all sounds like gibberish to you at this point, that's okay. Have faith. As you start learning the basic concepts, your knowledge will have a snowball effect and all of this will seem like second nature.
TLDR
Leverage is the key to unlocking the full potential of credit card reward points. By strategically applying for cards, maximizing bonus categories, optimizing points transfers and redemption, you can still spend the same amount of money and amplify the value of your rewards.
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