Cashing in on heightened credit card competition

Michael Prentice
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A dollar saved is a dollar earned – and I figure I’ve already saved more than $1,000 this year on upcoming flights.

Michael Prentice

How did I do it? By taking advantage of deals banks and other lenders offer on their credit cards.

Retailers and consumers love to complain that credit card fees are excessive. But the credit card industry is fiercely competitive. And, lately, card issuers have been going to great lengths to persuade consumers to switch from one card to another.

As a result of this competition, there are big rewards for consumers who cherry-pick their credit cards to cash in on introductory offers. But these offers usually don’t last long, so one must look regularly for them, and act quickly when a good deal is spotted.

I found my biggest saving by signing up for an American Express Gold Rewards Card. There were two incentives that got my attention. The first was that American Express waived the $150 annual fee for the first year. The second – and much bigger benefit – was an almost-free round-trip flight almost anywhere in North America.

I say “almost free” because I must still pay the taxes and fees, as is the case with most credit card rewards programs. I must also make at least $500 in purchases on the card in the first three months, but those are expenses I would have incurred anyway.

I calculate the flight benefit is worth about $600. That is the typical cost, before taxes and fees, of a round-trip flight between Ottawa and Vancouver. With the $150 saving from getting the card free for the first year, I figure the total savings are $750.

There was another advantage to the American Express Gold Rewards Card. It does not tie me to one airline rewards program, of which the biggest is Aeroplan. While I have the option of cashing in my reward through Aeroplan, I can also redeem it through other programs, including Delta Skymiles, of which I am also a member.

My second big saving was on the TD Aeroplan Visa Infinite Card. I walked into my TD Bank earlier this year and a smooth-talking salesman made me a two-for-one offer that seemed too good to refuse: Sign up for the card (with the $120 annual fee waived for the first year) and get two round-trip air tickets for a short-haul flight, such as Ottawa to New York City.

I accepted the offer and got the TD credit card, but then decided not to take that two-for-one deal on a flight to New York. The reason: Air Canada wanted to charge my wife and me almost $180 each in taxes and fees for the round-trip flight to New York. (I’d rather spend seven or eight hours driving to New York than pay that much to fly on “free” tickets.)

Still, by taking the card I earned 15,000 Aeroplan points, which I put towards the 25,000 points required for a return flight on Air Canada to British Columbia this summer.

I estimate those 15,000 Aeroplan points to be worth about $400. With the $120 saving on the annual fee for the first year, I put my total savings on the TD card at about $520.

Of course, with both those credit cards, it will be up to me to decide whether to keep the cards beyond the first year, during which time the cards are free.

My third saving recently was by upgrading my existing Bank of Montreal Air Miles MasterCard, which is free, to a BMO Air Miles World MasterCard, which carries a $99 annual fee.

I learned – too late – that the Bank of Montreal had recently been offering a bonus of 1,000 Air Miles for those signing up for its Air Miles World MasterCard. I estimate that offer would have been worth $300 or $400. But it had expired by the time I learned of it.

Still, by paying $99 to upgrade my card, I earned a benefit that I estimate is worth three or four times that first year’s annual fee.

Whom should I thank for my subsidized air travel? Well, myself and other consumers, who all have to pay higher retail prices and user fees to cover the credit card industry’s inflated costs.

Better make the best of it, I say.

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