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Some people make the mistake of thinking that their credit card miles are free. That’s a terrible error. Miles you earn from credit card spend is not free. The welcome bonus might be, but anything else is not.
In most circumstances, this is because you earn miles and points by foregoing something else – cashback. Most premium credit cards earn you one mile per dollar, whether it’s Aeroplan, Membership Rewards, or any currency. It’s not bad, but you need to compare it to the MBNA Rewards World Elite MasterCard. This is one of the best cash back cards available. It earns two rewards points per dollar, along with 10,000 bonus points after completing your first purchase. Each 10,000 points can be redeemed for $100, so it effectively is a 2% return.
MBNA World Elite MasterCard
This means, for each dollar you spend, you must earn the equivalent of 2.0 Canadian cents or 1.55 US cents in value. If you earn less than that, then you should switch your credit card. With bonus categories, the opportunity cost is even more apparent. The American Express Cobalt Card earns 5 points for every $1 spent on groceries and dining, equivalent to a 5.0 cent return. Any time you use another card, you pay more for your points than you might think.
American Express Cobalt Bonus Categories
I value Aeroplan Miles at 1.6 cents USD, so it only makes marginally more sense to use an Aeroplan card instead of a cashback card. However, if you don’t value Aeroplan miles as highly as I do, then it makes even more sense to use an alternative card. In any case, that’s why I don’t use an Aeroplan co-branded card for most transactions. My go-to card is the SPG American Express for everyday purchases. It earns 1 Starpoint per dollar, which I value at 2.15 cents. For non-AMEX spend, I use the MBNA Alaska Airlines World Elite MasterCard. Each Alaska mile is worth 1.8-1.9 cents.
It’s difficult to quantify how much a mile is worth – so technically this is all theoretical. But for most households that spend mid-five figures on their credit cards, you should think about this whenever you pay for something with a credit card.
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Not sure I understand, if the Cobalt gives you a 5 point per dollar reward points, and exchange to SPG is 2.5 to 1, do you not use that for purchases that give the x5 multiplier?
Please clarify your strategy?
You do use the Cobalt for 5x categories. I’m not sure what you mean.
Just because you indicated you use the SPG AMEX what sounded like all your daily spend. So, if I understand you correct, you use the Cobalt (for food, etc.) and then SPG for all else, except when you cannot use AMEX you use Alaska MC?
Just trying to figure out your strategy to gain points, etc.
thx
Correct. I use SPG AMEX on all non-bonused spend, then the other cards in their relevant categories.
My exact strategy, hah.
My strategy, too. The Cobalt has been KILLER for my food purchases!!!! 🙂
My CIBC Dividend Visa earns 4% on grocery and gas or should I use SPG Amex for grocery and gas? Probably try to earn SPG points rather than Aeroplan going forward since I stay in hotels more than I fly.
Tough to beat 4%, isn’t it?
You get 4% indefinitely?
Only $20k in grocery and gas purchases are eligible for 4% out of the first $80k annual spent then it it became 1%. I will switch to other cards once I hit the $20k. A room at Whistler Westin during ski season is around CA$900/night or 20k points so SPG points are worth around CA$0.045.
Do you take annual fees into account when considering the rewards worthiness of a card? For example that MBNA card you mentioned here costs $89/yr (beyond the first year where you get the bonus), so your first $4,500 of purchases is only making up for that. I have the cobalt, and my biggest frustration there are the many food and grocery vendors in Canada fwho do not accept AMEX (Loblaws being the most obvious example, most non-chain restaurants), and therefore missing out of the 5x benefits.
Close and reopen the card. Or get a fee waiver from retention. There are lots of ways.
I’m more frustrated by not being able to earn grocery spends at WalMart. I could care less about not being able to use my Amex at Loblaws or Costco, since I don’t do regular grocery spends there…
I assume with all the changes with the Marriott merger (or debacle?) would your strategy remain the same with SPG being your main card for purchases, or is the Cobalt now the leader?