Travel rewards pledge: earn while you spend

Most cards come with high interest rates and fees, so discipline is the key to coming out on top

Unless a sign says ‘cash-only,’ Roxana Greszta pays for all purchases with one of her three travel rewards credit cards.

“There are people out there who are super-serious about their rewards cards,” says the 31-year-old consultant from Toronto. “They do these crazy things to double and triple their travel points. I just have a couple of travel cards and use them regularly.”

As soon as Greszta graduated university and landed her first job, she was given a rewards credit card issued by her employer.

She was hooked once she saw how quickly she racked up points.

“I travel all the time. I call up [her best friend] and say, ‘Do you want to go somewhere in the U.S. for a weekend?’ So we’ll pick a 15,000 point flight and we can go to Miami, New York, Boston — all these great cities and all you pay is the tax,” she says.

There are about 75 travel rewards cards in Canada. Although built on the same premise, each card comes with its own terms, conditions and perqs. “I travel for work, so I accumulate points at a higher rate,” says Greszta.

It’s no secret Canadians love to travel. In February (the last month for which data is available), Canadians took 5.6 million trips abroad, according to Statisticss Canada. Of those eligible to redeem from travel rewards cards, 30 per cent did not, says Rewards Canada, a business that tracks points cards and occasionally works with card companies.

Why do people not redeem their points? Complications in doing so may be a factor. “With my mom’s travel card, when she books a flight on her card, she then has to call the card company to get a credit towards that purchase based on the amount of points she has,” says Greszta. “The credit system can be complicated, and I think that’s why she doesn’t redeem as often.”

Consumers need a solid understanding of their spending habits to choose the right card and to collect points effectively.

“If you’re going to be spending a lot, and you want to fly business class, you may want a card that has an airline tied to it,” says Patrick Sojka of Rewards Canada. Sojka adds that these cards usually oper- ate on a clear point-for-dollar system.

“If you’re aiming for economyclass tickets for the whole family, you don’t care about airlines and you just want the best deal, so you’ll want a hybrid card,” he says. “Those are by far the most flexible, because you can buy travel however you want.”

A consumer who chooses this type of card will have many online booking options.

But they will need to charge the trip on a credit card first, and then call their credit company to put points toward the purchase.

The Canadian Bankers Association says there are hundreds of institutions in Canada, including banks, credit unions, retailers, trust companies and finance companies, that offer credit card products, and a growing number have evolved to offer travel rewards.

“If you’re going to be spending a lot, and you want to fly business class, you may want a card that has an airline tied to it.” PATRICK SOJKA REWARDS CANADA

Jennifer Arthurton of Visa Canada says rewards cards are developed for two main audiences.

“There’s the general mass market segment: those who look at travel rewards as being an aspirational benefit that will help them with the once-in-a-lifetime trip. And then there’s the affluent segment, where what they’re looking for in travel rewards is less about free travel than it is the experience of travel and lifestyle benefits.”

Free trips, lounge access, prompt passage through the security line, check-in with business class and rates of rewards that accelerate after a certain target is reached — these are among top lifestyle benefits offered.

Travel rewards cards come with high interest rates, of about 20 per cent. And most cards come with an annual fee. It’s up to the consumer to decide if the yearly cost is worth it. Someone who often carries a balance will likely pay more in interest costs than they would earn in rewards. But consumers who pay off their balance in full each month need not focus on the rates. Clearing the card regularly is the key to maximizing travel rewards. Household income can also be a factor in what card to hold. Some travel rewards cards require applicants to earn a minimum of $60,000 or even $100,000 per household. Toronto-based Karolina Ksiazek travels for work and for pleasure. She sees the annual fee as a money- saver. “I don’t mind paying an annual fee, because it’s not extreme,” she says. “Also, I travel a lot. If I didn’t have this card, I would have to pay about $20 in travel insurance every time I travel, so the fee is worth it.” Travel insurance is an attractive perq. Medical, accident, and trip-cancellation benefits come with most rewards cards. “And then you get into other insurances, like flight-delay, lost baggage, and rental car insurance,” says Sojka. “A lot of these are now standard.”

Card-issuers are finding new ways to impress and lure new travel rewards customers.

“Whether it’s playing golf with a PGA golfer or flying in and getting backstage passes to a Lady Gaga concert, the industry is responding and evolving based on growing demand,” says Sojka.