With Bank of Montreal now at the controls, a crash landing for Air Miles has been averted.
Enjoy the respite if you have a whack of Air Miles points, and then start thinking about how to redeem them sooner rather than later. The tough economics of running a customer loyalty program brought Air Miles to the brink, and they limit its recovery potential as well.
Once the king of customer loyalty in Canada, Air Miles ran into trouble about six years ago when it announced a plan to have points older than five years expire. Air Miles backtracked after a fierce customer backlash, but the damage was done. “They could never recover from that,” said Patrick Sojka, who as founder of RewardsCanada.ca has been following the reward business for more than 20 years.
Mr. Sojka said Air Miles increased the number of points needed to book some flights in recent years, though he noted that it also added booking flexibility. Crushingly, partners such as Sobeys, Safeway, Staples, Rexall and Liquor Control Board of Ontario (LCBO) stores left the program.
Late last week, news broke that Air Miles had filed for bankruptcy protection as a result of heavy debts. BMO then saved the day by signing an agreement to buy Air Miles parent LoyaltyOne Co. BMO said the deal, which requires court approval, would have no impact on Air Miles members collecting or redeeming points.
BMO has talked about reinvigorating Air Miles, and maybe it can. Job one is to sign up some high-profile partners and re-create the feeling that you’re missing out if you don’t have an Air Miles card.
One risk of redeeming your points is that you miss out on a better Air Miles to come. But there’s also a risk that BMO devalues Air Miles points in the future in an attempt to make the program financially stable and profitable. BMO has a history of devaluing its own reward points, as have other players that offer customer loyalty programs.
Truth is, devaluations are part of doing business with customer loyalty programs. “They love to promise a lot,” Mr. Sojka said. “And then the chief financial officer takes a look at the numbers and says, ‘We’re giving away too much. We have to change the program and make it a little less valuable.’”
Also working against Air Miles is the difficulty of getting the program into more stores. Partners that left the program did so because of the cost of participating, Mr. Sojka said. Some found it was cheaper to start their own loyalty programs, or join another program. Sobeys has linked up with Bank of Nova Scotia’s Scene+ program, while the LCBO now offers Aeroplan points.
Air Miles users have also soured on the program. In a Twitter poll I did last week, 52.6 per cent of the 555 participants said they have stopped using Air Miles, 27.4 per cent summed up the program as disappointing, 17.1 per cent said it was OK, but not what it once was, and just 2.9 per cent thought it was good as ever.
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Rob’s personal finance reading list
Renos for renters? Yes, it’s a thing
A Toronto resident fixes up her rental for $500. “Vintage French farmhouse.” OK, sure. What I like here is the idea of renters personalizing their place. Not just for homeowners.
Did lifestyle expectations rise, or is life more difficult?
A lively discussion on Reddit about how we came to be in a position where the cost of living your life and owning your home came to be so expensive.
Eight ways to save on tax in retirement
A useful run-through of ways to save on tax in retirement, most of them applicable to couples. Solo seniors will just shake their heads.
Cool Winnipeg
Calgary is a hot spot for people moving out of expensive cities in Ontario and British Columbia, but how about Winnipeg? Here’s a guide to the best spots for food, booze and art in Winnipeg, where the average house price in January was $323,600. The national average price was $612,204, with Calgary at $509,900.
Ask Rob
Q: Should bond mutual funds be sold at a loss because of higher for longer interest rates?
A: Higher for longer? The fallout from the collapse of Silicon Valley Bank suggests the higher for longer outlook is on ice for now. While inflation in the United States is persistent, it’s actually been cooling in Canada. This gives the Bank of Canada reason to keep rates level for now and then possibly lower them late this year or early next. The point is, we don’t know for sure where inflation and rates are going. I’m not sure selling a bond fund now is the right move, in that context.
Do you have a question for me? Send it my way. Sorry I can't answer every one personally. Questions and answers are edited for length and clarity.
Today’s financial tool
Thinking of moving to a different province for a cheaper cost of living? Check out this calculator to see how your tax burden would change.
The money-free zone
The new album from country-folk artist Iris Dement, Working’ On a World, is such a pleasure to listen to. Beautiful uplifting music, but with some bite. Start with a the song called The Sacred Now.
From the Twitterverse
Get some historical perspective on the run-up in interest rates from this chart, which goes back to the 1930s.
What I’ve been writing about
- The harshest interest-rate hikes of all are still under way at the big banks
- Property taxes are popping in some cities – how worried should you be about other tax hikes?
- Answers to your questions about the low-risk ETF paying almost 5%
More Rob Carrick and money coverage
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Even more coverage from Rob Carrick:
- 🎧 Catch up on Stress Test: Is the middle class dead for millennials and Gen Z? • Gas prices are soaring. Are electric vehicles an affordable solution? • Crypto is booming, but should you invest? • How are young Canadians dealing with soaring rents? • Inflation is squeezing our finances. What can we do about it? • Is a hot housing market squeezing Canadians out of their small towns?
- ✔️ The housing file: How bad is housing affordability? Even a crash won't help • Sell the family home to lock in profit and then rent? Better not • Why young adults can't afford houses: Hard work got you more in the past than it does now • Five reasons you should not buy a house till you're at least 30 • Now more than ever, owning a house is not a retirement plan
- 📈 Investing: The 2022 ETF buyer's guide: Best Canadian equity funds • The 2022 Globe and Mail digital broker ranking: Does the zero-commission revolution flip the script on who's best? • With bonds sinking, conservative investors are waking up to risks they never saw coming • A five-step plan for dealing with the sad fact that almost every investment is falling lately • The best financial advice in advance of retirement? Work on your marriage • One-year GICs are the best deal in town for safety seekers • What to do if the financial plan you paid thousands for disappoints
- 💰 Your money: Are you prepared for the pandemic wealth boom to blow up in our faces? • This hard-working 24-year-old is nailing it financially. But where’s the happiness? • Who should and shouldn’t worry about the wave of rate increases this year, and what every stressed-out borrower should do right now • Don’t make this potentially costly assumption about the CPP Survivor’s pension
