Jan

Collecting Aeroplan Points and Their Value

Written by Neil Galloway

Why I think an Aeroplan mile/point is worth 1.6 cents and if you should collect them with a credit card.

Aeroplan points, Air miles, HBC points, PetroPoints, etc, etc, all the way back to Club Z Points at Zellers. They seem like such a gimmick and just a way to influence your spending. The thing is, they are everywhere now and you can't really avoid it, so you might as well take advantage of it. I have calculated how much I think they are worth so read on.

I personally collect Air Miles and Aeroplan Points so I just talk about those. This posting is about Aeroplan Points specifically, but the same techniques can be used to figure out Air Miles. You can read these related articles...

Canadian Credit Cards

Note: I interchange the word points and miles throughout this article. They mean the same thing. An Aeroplan Point and an Aeroplan Mile are the same.

To calculate the value of an Aeroplan point I priced out a flight on their website using points and then priced out a similar flight the same day using Air Canada's website. From that, I determined an Aeroplan point is worth 1.6 cents/point. I will explain later how I came to this.

How to Collect Aeroplan Points

Aeroplan, first of all, is free and there are three different ways to collect.

You can apply for an Aeroplan card and just keep it on you. If you shop at stores that are affiliated with them (Future Shop, Esso, etc) then you just hand them your card and you collect some points whenever you purchase something.
You use it whenever you fly with Air Canada or some other Star Alliance member airline. You will receive a certain number of Aeroplan points whenever you fly somewhere. This is free as well.
You apply for a CIBC Aeroplan VISA card. There is a fee for these cards. $29/year will give you the CIBC AeroClassic VISA card that will give you 1 point for every $2 you put on the card. $120/year will give you a CIBC AeroGold VISA card that will give you 1.5 points for every $1 you spend on it.

So you may get aeroplan miles on any purchase if you use your Visa and at Aeroplan affiliates you can "double dip" by collecting Aeroplan miles using your Aeropan card that they give you and paying for your actual purchase with your credit card and getting aeroplan miles from CIBC.

These points can later be used to buy flights, car rentals, hotels rooms, and a few other products. With flights and car rentals you will still have to pay the taxes, but the base fees are covered by the Aeroplan points.

So this is the basics of the system. Now I will discuss what they are actually worth.

What is Value of an Aeroplan Mile? (How I Figure Out How Much They Are Worth)

This is an interesting question. Basically, I went through the steps of booking a flight through Aeroplan and through the Air Canada website from Calgary to Victoria.

The cheapest price I could find for the flight was $321.54 including taxes (this was with the no baggage and other deduction options). With Aeroplan, it was 15,000 Aeroplan miles plus I had to pay $78.80 for taxes and other fees.

So I can assume my 15,000 Aeroplan miles were worth $242.74 (the difference in money out of my pocket). This means one Aeroplan mile is worth around 1.6 cents.

Note: Other products/rewards require more or less Aeroplan miles, which can make them worth more or less money than 1.6 cents/aeroplan point.

Basically, my advice is to check out how much money you "actually" save by using Aeroplan miles to purchase something and how many Aeroplan points it takes and plug it into this formula:
Aeroplan Miles Value = Money Saved / Aeroplan Miles Used

Should I Get a Aeroplan Visa Card or Upgrade My Existing One?

Should you pay the annual fee to get Aeroplan Miles? This depends on how much money you spend on your credit card and what you will use your miles for. The more you spend, the more likely an upgrade will be a good thing.

Now that we did our calculations above to see what an aeroplan point is worth we can figure this out. Ask yourself what you want to use it for. For me, it is flights.

I will show you whether you should upgrade for the flight example I did above. To calculate this I made a formula that took into account the annual fee and what the value of an aeroplan mile is to figure out how much money you would need to spend to at least recover the annual fee in aeroplan miles value. The formula for getting the $29 basic card is 58 / Aeroplan Miles Value. The formula for the $120 gold card is 80 / Aeroplan Miles Value. If you want to see how I figured these out, send me an email and I'll send you the proofs.

For example, if I value an Aeroplan mile at 1.6 cents, this is the formula:
58 / 0.016 = $3625 80 / 0.016 = $5000
This means that I would need to put $3625/year on my AeroClassic Visa card to make it worth the fee and $5000/year to upgrade to the AeroGold Visa card. Once you have spent those amounts, the extra aeroplan miles you have earned are valued at the same amount as the fee you have paid.

Note: If the value you get from an Aeroplan mile is greater than 1.6 cents/mile, the amount you need to spend goes down. Just plug the value into the formula and you will see. Hotels, car rentals, vacations, etc might be a better deal.

This isn't the whole story either. There are other perks to these cards that I have not talked about. The AeroGold has better options for flights and other advantages so you should actually read up on it yourself. Sometimes there will be a feature to the card that will outweight the value I am talking about here (lower interest rate, other discounts, insurance coverage, etc.)

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Category: Finance

29 Comments

Peter Koning Says:
2007-02-02 12:54:04
Thanks for this posting. It helped me decide if it was worth using points .vs. paying for a ticket.

e.g. To fly return Kelowna<>Vancouver with Aeroplan the points were 22500 ~ $360. But with Westjet I found a flight that was $180 all taxes included. So

S.Le Says:
2007-02-27 16:54:25
I was wondering if you have made any comparisons between the CIBC Aerogold Visa and the RBC Avion Visa?

Neil Says:
2007-02-27 18:55:15
No, I haven't checked out other cards and I should. I was just in Starbucks and I see they have one of those 1% back cards where you get actual gift certificates back. They might be better too. I will try and do research on those cards as well.

james briggs Says:
2007-08-14 11:26:54
lost cards what to do ?

robert solda Says:
2007-10-19 09:02:31
i have the cibc aerogold and i believe that you earn 1 point per dollar spent. you can earn .5 additional points at esso stations. is that what you meant?

Michael Davie Says:
2007-11-04 12:22:21
Thanks for the article. I just wanted to add a couple points.

- As someone alluded to above, you get 1 mile per dollar with most purchases with the CIBC Aerogold Visa, but 1.5 for gas stations, grocery stores and drug stores.

- Using your Aerogold Visa and Aeroplan card at Esso means you get 0.33 miles per dollar from Esso and 1.5 miles per dollar from CIBC for a total of 1.83 miles per dollar.

- You can also get Aeroplan miles directly from most hotel loyalty programs. These are (in my experience) always free and are another way to double dip on hotel stays.

Forone Says:
2007-12-23 12:06:31
I just today learned about the new Aeroplan Music Store, which on investigation offers 50 songs for 6000 points, or 120 points per song. Apple iTunes, etc. typically charge $.99 per song, so there's another money comparator: a dollar is about 120 points.

Tammy Woroschuk Says:
2008-04-30 15:54:34
Thanks for the information. I have a Westjet Gold Mastercard (no more than 1400 airmiles to fly) and they have made some pretty significant changes now. I no longer get that option and can only get 20% off the airmiles needed to purchase a flight versus the next person without the gold mastercard. It is no longer worth the 90/year cost for that card. This website has me looking elsewhere for my points collection. Thanks

Marcelle Dumais Says:
2008-05-06 20:47:19
How do I exchange Aeroplan for Esso

Howie P Says:
2008-07-02 22:44:47
Please let me know if you\'ve done the AeroPlan vs. RBC Avion comparison. I\'d be very interested in reading your findings. Thanks

Aaron Says:
2008-07-10 10:41:47
Very cool, thank you for the article.
I was too lazy to do that math on my Aeroplan gold card. I'm very happy that it works out well in my favour. I'm starting to collect some more points with other services too.

I'll have to see if they can link the Esso speed pass with the Aeroplan membership so that I automatically double dip on my fuel purchases and then convert the Esso points after.

For the exchaging point question, this is what the Aeroplan site directs you to. Esso is on there with a ton of other points plans.
I haven't checked into the the losses for exchanging this, but I know one guy that I used to work with used this alot.

Cheers all!

Aaron Says:
2008-07-10 10:44:03
Oops, that did take the URL.

Points dot com for exchanging points between different rewards programs!

Steve Says:
2008-07-11 07:46:13
One thing you might want to take into account is income tax. In your analysis, 15000 points was equivalent to $243. But to spend $243, you have to make more than that, because the government wants their cut. I'm not sure, but you don't have to claim points as income, right?

So if you are taxed at 30% for example, you'd have to make $347 to spend $243. So now it looks like the points are worth more like 2.3 cents per point.

So the more income you make, the better the points look. Does this make sense, or am I totally off?

I'm pretty sure if you have a cash back program you have to claim it as income.

F D Says:
2008-07-15 19:23:05
I use the CIBC Aerogold VISA. For 80,000 points I got a ticket to Paris BUSINESS CLASS worth about $5800. That works out to 7 cents per point. Or a 7% refund. Much higher than your 1.6 cents per point. But of course you need the 80,000 points per person to cash in like this.

T.dot Says:
2008-08-07 15:48:29
You do actually have to pay tax on airmiles and aeroplan points.

BB Says:
2008-08-26 10:35:43
@ T. dot
I think you and Steve are talking about two different things.
Yes, you have to pay the taxes (GST, etc) on redemptions but the benefit you receive (using points to purchase service) is not by itself taxable.

JM Says:
2008-09-10 23:30:22
Aeroplan and Airmiles points are considered income and ARE taxable (although the large majority of people do not claim them in their tax returns). If you are auditted by the government, you can be forced to pay tax on rewards points as they carry a monetary value and are considered income.

Omar Says:
2008-11-09 03:04:57
What if I get an aerogold card and a supplementary one for my wife, i.e., total fee $170.00? How much would I have to spend on it per year to make it worth it in aeroplan points?

Simon Says:
2008-12-01 15:35:08
Can you guys confirm if these points have an expiry date, a friend of mine was telling me that if you do not use the points you accumulate will expire at the end of the year.

Terry Says:
2009-01-30 03:33:54
The points do not expire at the end of every year, but you do have to use them within 7 years. It's probably best to look on the web site for all the details. Thanks for this info, very interesting!

mike Says:
2009-07-13 23:08:15
The dollar value per point isn't necessarily accurate.

From my research I found out that for example a return flight from Calgary to Vancouver is 15,000 miles. Air Canada typically charges you more if you pick flights at certain times. For example, if I fly return take flights between 11 AM - 1 PM both ways my flight can be as expensive at $300 before tax. If I take 6am flights each time my flight would cost $200 before tax. However both times my flight would cost 15,000 Aeroplan points.

Perhaps there should be a strategy for redeeming points. For example, save your points for peak travel times and pay out of pocket for cheaper flights. Using WestJet seat sales instead of Air Canada in those cases you could potentially even save more.

Perhaps an idea for another article!

VJ Says:
2009-09-26 18:29:08
Regarding income taxes, I believe that the only time the points accumulated would attract income tax would be if they were gained through your employment; i.e. if you got points because you spent money for business purposes (hotels, gas, etc.), in which case it\\\'s a benefit derived through employment. However, if you are purchasing something for personal use, then it\\\'s simply akin to a discount received, or an incentive to shop, and hence not taxable.

cannon_fodder Says:
2009-11-17 15:11:03
There is a less subjective way to calculate their worth. Figure out how much money in gasoline gift cards you could get with your points since gasoline is a commodity that is widely used and rarely on sale.
With Airmiles, 175 Airmiles nets you a $20 Shell GC, or about 1.1 cents/Airmile.
With Aeroplan, you can use 12,500 Aeroplan points for a $100 Esso GC. This translates into 0.8 cents/point.
Many people would peg Aeroplan points best usage to be purchasing first class tickets. There are documented cases where people have travelled around the world in first class on just 120,000 Aeroplan points plus $200-$400 in surcharges/taxes. That could translate into at least 20x the benefit of using points to purchase gas GC's.

Sean Says:
2009-11-24 22:49:32
While most of the calculation showed here are correct, there is more to consider when you consider whether you need to upgrade your card.

Let us say that you earn 1.5 miles/dollar(not true, only in some category)spend by using your CIBC AEROGold Card. that is equal to 2.4c/dollar based on how you value the points.
Now let us say you get a Fee free cashback card from MBNA and you get 1.5c/dollar spend. So the incremental rewards you get by using the CIBC Gold Card is only 2.4c-1.5c = 0.9c.
In order to make your 120$ fee worthwhile, you need to spend at least 120$/0.009$= 13,333 on your CIBC card.

One thing to remember is that you are only getting the incremental benefits by using the fee product compared to the fee free card.

otropogo Says:
2010-02-12 16:15:21
I second the point made by Sean above. Given that it's possible to get dividend cards with no fees or with lesser fees, even from CIBC, the cash value given up by choosing aeroplan points instead must be taken into consideration.

The fact that cards with higher fees may offer greater cash back dividends (albeit only when the annual purchases pass a certain threshold), and OTOH, that there are also benefit features (travel interruptions insurance, travel medical coverage, etc) that come with the premium cards, further complicate these evaluations.

But a relatively simple comparison is possible between the CIBC Infinite Dividend card and the Infinite Aerogold card. Where the difference in annual fees is only $39 ($61 if a second card is issued).

On the dividend card, the first $3000 of purchases are rebated at .5%, the next $12000 at 1%, the next $20,000 at 1.5%, for a total of $435, and the remainder (up to a maximum contributing total of $50,000) at 2%. So on $40,000 of purchases, the rebate is $535.

To this one would have to add the $39 or $61 in extra fees needed to accumulate aeroplan points on the Aerogold Infinite card, and calculate the number of points the same purchases would generate and their real market value.

The vague definition of "grocery stores" generating 1.5points/dollar is the biggest obstacle to a clear comparison. And all the possible bonus points from select vendors further complicate matters. But it's probably close to the mark to expect $10,000 of annual purchases to be of groceries, generating 15,000 points, for a combined point total (conservatively) of 45,000 points vs. $600 of dividends.

Of course, as annual card purchases rise above the $50,000 dividend limit, the balance changes in favour of the Aeroplan card.

janet terry Says:
2010-05-08 16:02:01
do a person leaving nigeria to united state need goverment visa pocket...and is it worth $5000

Lisa M. Says:
2010-08-01 14:35:04
Thanks for posting this info; it's exactly what I needed to know!

Maria B Says:
2010-08-31 13:12:08
With my husband will soon have enough aeroplan points to go around the world, I believe we need 180,000. We have to use before 2013. We plan to go around the world starting December 2011. Any idea how should we plan, want to include India and New Zealand.

Jimmy S Says:
2010-09-02 19:24:01
To Maria B, you only need 150,000 Aeroplan miles to travel around the world (75,000 each person). When you book it select Multi-city and it allows you two destinations in the world for 75,000 miles but I've discovered some restrictions.

For example you can book Toronto to Bangkok, Bangkok to Mumbai and Mumbai to Toronto (and only costs 75000 miles as I just tried it). However if you try Mumbai to Melbourne and Melbourne to Toronto it doesn't work. I believe the 3rd leg exceeds a preset maximum distance or cost, however I may be wrong so call the aeroplan number to try booking it.

If I am correct then you could try an open jaw ticket where one leg is your responsibity to get there. For example book toronto-bangkok, bangkok-auckland and mumbai-toronto. Then you would use a low cost asia airline to get from aukland to mumbai.

Other interesting world combinations include Toronto-Bangkok-Cairo or in other words Toronto-Asia-Europe.

For you folks using your air miles for gifts or short haul flights, it's not worth it. Use it for around the world trips that would normally cost you ~$5000 (that's a 7% return).