Why I switched to a cashback rewards credit card
I have been an Air Miles collector for a long time. Many people have asked me if Air Miles is the BEST reward program and I always disclose that I have not done a lot of research or comparisons in this area.
I did some analysis a while back and thought the Air Miles system was not too bad at the time.
Related article: Is the Air Miles program a good deal?
BMO Air Miles World Elite Mastercard
Recently, I was offered the BMO Air Miles World Elite Mastercard which gives me 1 mile for every $10 I spend which is improved from my current Mastercard that gives me 1 mile for every $15 I spend.
When I look at my Mastercard bill over the past 12 months, We spent a whopping $87,132. That means we were averaging $7261 per month of spending. That’s a lot of spending but in case you are not aware we consciously put all our spending on that single credit card
Related article: A simple way to track spending
If I repeat that spending moving forward, based on the new 1 air mile per $10 of spending, I will get 8713 Air miles for the same level of spending.
So what would 8713 Air Miles get me?
- Based on the cash reward system, every 95 points gets you $10 in cash. That means I would earn $91. $91 is horrible return off $87,132 of spending.
- Based on flight rewards, these points are probably worth closer to $1000
- Based on merchandise, these points are worth about $800 to $850.
These points are based solely off my credit card spending. One of the benefits of being an Air Miles collector is the ability to ‘double dip’ and collect more air miles from preferred vendors. I figure I get 4000 to 5000 Air Miles per year from other sources but I could get that regardless of the credit card.
This got me thinking about the cashback equivalent:
- $91 on $87,132 of spending is the equivalent of 0.1% cashback. That’s horrible!!!!
- $1000 on $87,132 of spending is like a 1.15% cashback
- $850 on $87,132 of spending equates to a 0.975% cashback.
So, could I do better with a cashback card?
The new BMO CashBack World Elite Mastercard
After doing this analysis and also reading a couple of articles on cashback rewards credit cards, I realized that BMO has a cashback version of my World Elite Mastercard. It earns 1.75% cashback on all purchases with no restrictions. That means on the same $87,132 of spending, I would get $1524 in cash back rewards which makes it a big winner over the Air Miles Rewards version.
I also looked around at some other cashback cards and there are lots to choose from. Some cash back cards give better rewards (2% to 5%) for grocery purchases, gas purchases and restaurant purchases but the base rate is usually lower at around 1%. Given that I am also a fan of simplicity, I think 1.75% is easy to understand and a solid reward value. Both BMO World Elite Cards have an annual fee of $120 but currently this is waived for the first year.
The bottom line is I have already made the switch to my new BMO CashBack World Elite credit card. It will hurt my special Onyx Air Miles status but in the end, I still think I will win with the simple, easy to understand a 1.75% cashback rewards credit card!