Something for (almost) nothing: which frequent flyer rewards program is best for you?

When the first Frequent flyer program was launched by American Airlines 21 years ago, it started a trend that put other ’80s phenomena to shame. Our passion for big hair and Brat Pack movies quickly dissipated, but the demand for frequent flyer programs just kept growing. Before long, the scheme had been widely copied by other carriers, including Air Canada, which launched its own version — in 1984.

The original premise of these pioneering frequent flyer programs was simple. You flew a certain distance, got a corresponding number of reward miles and eventually cashed in your points for a free ticket. But, like Michael Jackson’s music, frequent flyer programs have changed a lot since then — and not always for the better.

The original plans have morphed into a labyrinth of lookalike alternatives with tie-in deals and complicated restrictions. While Aeroplan is Canada’s only program aimed squarely at frequent flyers, its basic structure has been copied by Air Miles, a frequent buyer program that allows even the most earthbound consumer to collect rewards for such daily chores as grocery shopping and drug purchases. Credit card companies and banks have leaped into the fray with their own points-for-purchases programs.

How does a wise consumer decide among these competing options? Step No. 1 is to know what each program offers. Step No. 2 is to decide which plan makes the most sense for you — despite what the purveyors of these programs would have you believe, points are hardly free.

Consider Aeroplan. It’s a good program by the standards of most airline plans, but it’s not quite the something-for-nothing extravaganza that many people believe. While your miles may have appeared to cost you nothing, you still have to pay to redeem them because only the base price of reward tickets is covered. Surcharges (such as airport improvement fees or the Air Travellers Security Charge) and applicable taxes are all extra.

If you’re relying upon a credit card as your primary way to accumulate Aeroplan miles, you also have to factor in your annual fees and interest costs. For instance, the CIBC Aerogold Visa card attracts consumers with big sign-up bonuses and the promise of one Aeroplan mile for every dollar charged. But with an annual fee of $120 and a 19.5% interest rate, card-related expenses can quickly equal a ticket price.

The hassles don’t stop there. Dreaming of a sunny midwinter escape? Dream on: Aeroplan enforces blackouts on many hot spots during peak travel periods. Looking for a last-minute getaway? Good luck: reward tickets typically have to be booked months in advance. In fact, growing competition among customers for limited numbers of reward tickets can make redeeming your miles a challenge at any time.

So should you give your loyalty to other programs? Topping the list is Air Miles. With 12.5 million collectors, it’s Aeroplan’s biggest competitor. And since miles are earned exclusively through retail partners and service providers, it’s an attractive option for people who spend more time in shopping malls than airports.

Then there are smaller, bank-sponsored programs like the ones Royal, Scotia and TD run in conjunction with Visa. Along with assorted benefits like sign-up bonuses and hotel discounts, these offer card-holders one point for every dollar charged, which can be applied to tickets booked through the bank’s own travel service.

In raw monetary terms, there’s not much to choose among these programs. The rewards offered by Aeroplan and similarly structured bank programs accumulate at the same rate, and experts estimate that their reward miles or points are worth, in theory, about two cents each. (Air Miles accumulate at a lower rate — typically one mile for every $20 in purchases — but you need fewer miles to start flying.) The real issue, however, is how much reward miles are worth to you. And that depends entirely on your collection patterns and travel preferences.

A program that suits frequent flyers who accumulate most of their reward miles while traveling for business might not be ideal for less nomadic consumers who have to collect miles on their own dime. Your choice of program will also depend upon the size of your household (Air Miles allows families to collect points as a group), where you want to travel (because the value of reward miles can vary considerably depending upon the specific flight you want to trade them in for) and whether you’re content with an economy ticket or want to go first class. Let’s look at a few typical collectors and see which program makes sense for each of them:

The frequent flyer

As Aeroplan members, Joe and Sue Tumilty of Gander, Nfld., aren’t thrilled with the customer service they receive. “We’re uncomfortable with its online system,” Joe says. “So we end up booking by phone and can spend hours trying to get through.” Nonetheless, the Tumiltys stick with Aeroplan because it gets them the most for their miles.

As chief of staff at the local hospital, Joe often flies on business. “Where we live, service from independent discount carriers is seasonal at best,” he explains. “So I usually take Air Canada anyway. The bonus is that the program gives me credit for every mile logged on the tickets I buy. Those add up quickly, especially if I pay with my Aerogold Visa, then top up my account by charging a few household purchases.”

Because of its location, travel to and from Gander is expensive. But Aeroplan’s zone system works in the Tumilty’s favour. For instance, 15,000 reward miles will get them a return ticket to Montreal with a base value of $873. Compared to some Aeroplan rewards, that’s a great value. (By contrast, a ticket from Calgary to Edmonton requiring the same number of reward miles is worth only $128.) It looks even better when stacked up against a voucher-style program like TD Gold’s. In that case, mileage earned at the same ratio would get them only 26% of the ticket’s base price.

Since their miles take them so far, the Tumiltys book four to six reward flights a year. Although blackouts don’t apply on the domestic routes they use, they generally have to reserve four months early to get a seat. That might pose problems for some, but the Tumiltys work around their daughters’ school breaks or special events scheduled far ahead. If plans change, they can alter their dates for $25 or cancel outright and have reward miles refunded for $75 (taxes extra) — but note that Air Miles allows this only if you pop for cancellation insurance and meet certain conditions.

The frequent buyer

Shirley Cooper, a savvy senior from Shediac, N.B., is a frequent buyer rather than a frequent flyer. The Air Miles program is just the ticket for her because its 100-plus partners provide so many mileage-building opportunities. She buys groceries at Sobeys and gas at Shell, gets financial services (including her Air Miles MasterCard) through Bank of Montreal, and subscribes to magazines (like this one), earning miles along the way.

Cooper can also convert HBC rewards earned through purchases at Zellers and The Bay into Air Miles. If she chooses, Cooper could even enlist her husband’s help because Air Miles lets an unlimited number of collectors accumulate miles in a single account, provided they’re all members of the same household.

When redeeming, she feels she has a better chance of getting a seat with Air Miles because she can fly on WestJet, as well as Air Canada and its affiliate, Jazz. Air Miles also work best based on her preferred destinations. For example, to visit her daughter in Ottawa, Cooper would need 25,000 Aeroplan miles. Air Miles’ zones, on the other hand, are drawn differently and reward categories are subdivided by travel dates. Since she’s happy to fly off-season, Cooper can get there for 1,150 Air Miles. That’s a significant saving.

Due to her age, however, Cooper worries about an unexpected illness wreaking havoc on her plans. Rewards have to be booked far in advance. I’m not always prepared to make the commitment. So what happens if she doesn’t want to travel herself? She can simply buy a ticket for someone else. Although neither Aeroplan nor Air Miles allows members to transfer miles into another account, policies regarding actual tickets are more flexible. With Aeroplan you can claim rewards for immediate family members. With Air Miles, you get them for friends, too. And for Cooper, that’s a big draw. Of course, she also has the option of forgoing travel altogether and trading Air Miles for merchandise. As Cooper says, “It’s nice to know they won’t be wasted. Everyone dreams of a trip, but a new stereo would do quite nicely.”

The luxury lover

David Ryan might not agree. The 29-year-old communications consultant from Vancouver has his heart set on a European vacation. Both major programs will get him there. Air Miles, for example, can be redeemed for international travel on Air Canada, American, United, Northwest and KLM. But using Aeroplan, Ryan can fly on Air Canada or any of its 13 Star Alliance partners (including Lufthansa and United), which together serve 124 countries. AeroPlan simply gives Ryan more airlines to choose from.

Depending on travel dates, he’d need 6,000 to 11,000 Air Miles to fly return from Vancouver to Western Europe (from Atlantic Canada, you’d need considerably less). Conversely, Aeroplan members can fly from any point in Canada for 60,000 miles. Based on the amount programs charge for extra miles, that’s a $600 to $3,100 difference.

Ryan, though, doesn’t just want to go to Europe. He wants to go in style. So Aeroplan’s other selling point is that it lets him pick his own grade of ticket. For an extra 20,000 miles, he can get an Executive Class reward. And if he collects a sufficient number in the air, he’ll also be eligible for Aeroplan’s top-tier status and enjoy benefits like priority check-in and airport lounge access.

With features like that, Ryan says, “I’m not surprised that Aeroplan was named the world’s best frequent flyer program” in an annual survey published last May. “I would have voted for it,” he adds, and with good reason. Ryan has found the travel reward program that best fits his personal collection and redemption profile. With a little research, the rest of us can do the same.