How Amex Wants You to Lose Big Time
American Express Canada recently launched a new option, letting card members fall for instant gratification by letting them redeem daily purchases for small amounts. According to Amex, this option will provide ultimate flexibility and make daily life seamless. However, what Amex is not saying is that clients lose big time when they redeem points for daily purchases instead of converting to miles.
American Express points provide the best bang for your buck when you transfer them to airline miles, such as with Aeroplan or Avios. The transfer rate is 1:1, meaning you will receive 1 airline mile for each point. Now, if you are knowledgeable about airline rewards programs you should be easily able to extract 5 to 6 percent return per dollar flying business or first class. Sometimes the return can be astronomically high like 30 percent flying business or first class on airline miles. If you fly economy class using miles, your extraction rate will be a poor 1 to 2 percent.
So what’s the rate you are getting from American Express if you redeem points for purchases? Not even 1 percent. On the Amex Gold Card, the redemption rate is $7 for redeeming 1000 points. What this means is you get $0.007 per point, which is even less than 1 cent per point, making it a 0.7 percent return – not even 1 percent return. If you use Amex TripFlex option to redeem points for travel, you will get a 1 percent return or 1000 points for $10.
The best value Amex rewards points generate is when you redeem them to convert into miles. Of course you need to know how airline miles work and if you don’t want to follow that path, you should not have this card in the first place. There are other credit cards that offer higher return for redeeming points for groceries and other purchases. There is no point in having American Express credit cards, paying hefty annual fees and redeeming points at such a horribly low rate. Also don’t forget that although American Express is charging a hefty $150 on its popular card Amex Gold Rewards, it’s not providing many common benefits that another premium card would provide for a $120 annual fee such as Trip Cancellation Insurance, Concierge Service, etc.