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How much is an Air Mile worth?… and why you should opt out of the Air Miles Cash Program

30 January 2012

Countless people collect Air Miles, and other reward miles, but I wonder if enough people are asking how much are the damn points worth. The simple answer is that it depends.

If you redeem your Air Miles for a $20 fuel certificate at Shell:
1 Air Mile = 11.4 cents.

If you redeem your Air Miles for a 2 GB iPod Shuffle:
1 Air Mile = 5.8 cents

What gives?

Air Miles, and other reward programs, are marketing companies that try to bend consumer behaviour for their own benefit. Sometimes it can benefit the consumer, but I think that usually not the case. Air Miles has two opportunities it can take take advantage of you, the humble points collector.

  • The Earning Phase: where you collect your Air Miles
  • The Redemption Phase: what you do with your Air Miles

The Earning Phase

Air Miles and similar companies benefit when you go out of your way to buy overpriced milk at a specific grocery store just because it offers you Air Miles. Or drive an extra mile to fill up your gas tank at Shell. The extra money you spend usually isn’t worth the Air Mile you get, but that is easily cloaked behind the joy getting “free points”. When I worked as a cashier at Sport Chek I remember some customers wouldn’t have enough merchandise to meet the $20 threshold to collect 1 Air Mile, so they often buy a cheap item like a chocolate bar just so they could bring a subtotal from $19.99 to $20.98. If it isn’t obvious, these customers spent an extra $1 to receive a point worth 10 cents.

The Redemption Phase

Now that you have a collection of unused points, Air Miles can again profit from consumer behaviour by adjusting how much points it costs to redeem certain items. In the previous example of the iPod Shuffle and Shell fuel certificate, Air Miles benefits if you choose the iPod shuffle. The retail value of an iPod Shuffle is $56.49, which can be redeemed for 975 Air Miles. On the other hand, you could redeem 875 Air Miles, out of your 975 AM’s, to get five $20 Shell fuel certificates. That’s a retail value of $100 in gasoline. If you really wanted an iPod Shuffle, you could in fact redeem 875 Air Miles for the Shell fuel certificates, and use the money you didn’t spend on gas to buy TWO iPods. Not ONE, but TWO. Simply put, buying gasoline with reward points is boring. Saving up thousands of Air Miles for a “free” vacation to the Caribbean on the other hand, that sounds exciting. At one point I was guilty of hoarding Air Miles because I wanted to redeem them for an expensive gadget, but when I did the math, it just didn’t make sense. The table below summarizes some popular items and the value you would get out of your Air Miles (all prices include Ontario HST).

In March 2012, Air Miles is introducing a new program called Air Miles Cash – essentially another lever it can use to profit from consumers in the redemption phase. It took me a while to understand this silly idea. If you earn 1 Air Mile you have the option of depositing it into a piggybank called Air Miles Cash, Air Miles Dream, or both. Air Miles Cash allows you to redeem your miles instantly at the checkout counter for specific merchants like Shell and Pharma Plus, without the need for ordering and waiting for your reward in the mail. Air Miles Dream allows you to continue redeeming your miles for items in the rewards collection like gift cards, TV’s, cameras, kitchen supplies, etc.

The problem with this program is that the value of an Air Mile Cash is not equal to an Air Mile Dream reward. We already saw that the value of an Air Mile Dream can range from 5.8-11.4 cents depending on what you get. However, the value of an Air Mile Cash is easier to calculate. You redeem 90 Air Miles at the counter to save $10 off your purchase. That works out to 10.5 cents / Air Mile – a roughly 8% reduction in value compared to Air Miles Dream.

Reward programs are great, but they should never be an absolute incentive for you to go out of your way to an item at a particular store. And when you do have a hoard of points, think twice about what you redeem them for.

Air Miles Value based on Rewards

$20 Shell Fuel Certificate
(Redeemed as a dream reward)
175 $20.00 $0.114
$10 Shell Fuel Cash Rewards
(Redeemed instantly as a cash reward)
95 $10.00 $0.105
$25 GAP Gift Card 220 $25.00 $0.114
$50 HBC Gift Card 440 $50.00 $0.114
BOSE Audio 2575 $282.49 $0.110

+$80 cash

+ $80.00
GE Stainless Steel Over the Range Microwave 5500 $508.49 $0.092
+ $165 cash
+ net $165
iPod Shuffle 2 GB 975 $56.49 $0.058
iPod nano 8 GB 1575 $146.89 $0.093
iPod nano 16 GB 1850 $169.49 $0.092
iPod Touch 8 GB 2175 $225.99 $0.104
iPod Touch 32 GB 3100 $338.99 $0.109
iPod Touch 64 GB 3975 $451.99 $0.114
iPod Classic 160 GB 2675 $282.49 $0.106
Nikon D3100 with 18-55 mm 5900 $621.49 $0.105
Panasonic VIERA 50" 1080p HD Plasma 9625 $847.47 $0.088