It is essential to understand the different benefits you can get from various credit cards and how varying companies can accommodate your ever-changing needs. This blog goes over the difference between miles, travel rewards, air miles, and cashback.
Disclaimer: Credit card points and miles have different values depending on which rewards programme they belong to and which credit card you have in your wallet.
Points or Miles
How do they work?
Credit card miles, also known as points, are the currency of loyalty programmes offered by some rewards credit cards. The expression "miles" is closely correlated with airline frequent flyer programmes, but they have little to do with measuring the actual distance you've flown. You can earn miles or points with these rewards credit cards, which you can then redeem for airfare, hotel stays, or other travel expenses. Often, these programs reward us with miles or points for every purchase you make and bonus miles or points for spending a certain sum of money within a certain period of time after setting up an account.
Travel Rewards
Travel hackers know that the easiest way to earn miles is on the ground, not in the air, by using credit cards that offer miles upon sign-up and then again with each transaction. Usually, 1 point/ mile is equivalent to 1 cent when you redeem them for free travel; this is a set value. This is beneficial because you can easily understand the worth of your points/miles, and you do not need to figure out the redemption value of every purchase! When picking a travel rewards card, consider the value of the points you'll receive vs the annual fee or interest you'll pay if you carry a debt month to month.
Airmiles
More specifically, air Miles are loyalty programmes run independently, and purchases at partner businesses generate points, which may be used for tickets with certain airlines. Air miles are a type of incentive given out by credit cards linked to airlines. With every transaction, the cardholder gets air miles. Credit card firms collaborate with major airlines to provide credit cards that reward users for their purchases. Some firms offer clients a set number of air miles for signing up for a credit card. Others offer consumers the opportunity to earn extra miles for spending in specific categories. You may exchange your air miles for a plane ticket after you've collected enough.
Cashback
A cashback credit card is a reward card that allows you to receive cashback on transactions. Since the value of your rewards is evident, a cashback card might be a bit easier to use than a travel rewards card. Credit cards with cashback rewards give you a portion of your spending back (similar to a rebate). For purchases, the usual rate is between 1% and 2%. Different cards offer different benefits; choosing the right credit card is not an easy task. Without countless other credit card options in Canada, it can be challenging to decide which card is best for you. Something important to remember is that to decide which credit card is best for you, you must weigh the pros and cons. For example, some credit cards may have higher annual fees, but make up for this by offering cashback, rewards, lower interest rates or even mobile apps that make managing your finances more accessible! Read more about choosing the right card for you here.
Importance
With the onset of the covid-19 pandemic, travel rewards & Airmiles have reduced in importance & reward points for everyday items & cashback has been even more critical for consumers. Prior to the pandemic, airfare deals and travel points were incredibly useful and applicable to daily life. But with the risk of spreading coronavirus, credit card companies had to change their rewards program. Companies like Plastk Financial Inc & Rewards offer premium reward points on your everyday purchases everywhere that Visa is accepted! You can use your points for merchandise from thousands of brand names such as Apple, Sony, LG, Coach and more. Similarly, you can transform your points into a gift card from major retailers such as Amazon, Tim Hortons, Nike and more!
Credit card rewards points are evolving! People's budgets and lifestyles are changing, concerts, travel are losing significance, and everyday household items are gaining importance. Spending habits changing has made credit card companies shift their rewards mindset. Even when regular travel resumes, studies indicate that redemption flexibility will play a key role in how issuers de-center travel incentives in favour of daily advantages. This doesn't mean cards will neglect travel rewards; however, they will likely over a vast array of choices.
Disclaimer: The content provided on the Plastk Financial Inc. Blog is information to help Canadians become financially literate and learn about credit. Plastk is not responsible for building or ruining an individual's credit score or credit rating. It is neither tax nor legal advice, is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. Tax, investment, credit inquiries, and all other decisions should be made, as appropriate, only with guidance from a qualified professional.
