How I got my bank to pay me to fly to California

Alternate title -- Growth in Value's credit card experiment

After being bombarded by all the offers for new credit cards that my bank seems to send me on a quarterly basis (it's amazing what paying off your bill every time in full can do for your reputation) a few months ago I finally caved in and signed up for one of RBC's annual-fee cards.

I know, I know -- I can hear you all saying, "What? I can't believe it -- after the way he blathers about low-fee investing on his blog, he has the audacity to get suckered into paying for a credit card when there are so many free ones available."

I get it. But hear me out. While it's true that I have experienced a small amount of buyer's remorse after seeing the sweet deals that places like PC Financial and CIBC are offering (free groceries and cash back on purchases sound pretty damn tempting to me) I didn't just blindly go into this. I figured out, based on how much I was putting on my card in an average month, added to the bonus points I was being offered for singing up, I could get myself a free flight out of it.

Here's my plan:

I signed up for RBC's Platinum Avion card. It comes with all the usual accoutrements these cards tend to have -- deals on extended warranties, rental car insurance, traveler's cheques and insurance, etc. -- for a pricey (to me anyway) annual fee of $120. They gave me 10,000 points just for signing up, and 5,000 more points when I renew after the first year. So right off the bat, I'm at 15,000 RBC Rewards points even if I don't put a penny on the card for two years.

On my old, no-annual-fee card, I used to rack up a few hundred dollars a month, largely on purchases from retailers and online purchases. I think my most expensive month ever was about $500, and I had months of well under $100. The average was probably between $200 and $300 a month.

For my new plan to work, I need to start putting more money on the card to rack up points -- with the important caveat being that I'm not actually spending any more money than I would otherwise have spent through other means like cash and debit cards, because that would obviously negate any "savings" from points I was accruing.

Keeping in mind that I always pay off 100% of my bill on-time, I figured, if i start putting things like restaurant bills, groceries and gasoline on the card -- stuff I used to pay cash for -- I'd quickly rack up the points to get some sweet rewards. And it wouldn't actually be costing me any more in real dollar terms, since those are all items I'd be paying for anyway.

I've been doing this for six months so far, and my theory appears to be working. I haven't had a bill yet that was under $500, and I'm knocking on $1000 a month more often than not. It's amazing how much groceries you can buy!

So let's make a conservative estimate and say I'm putting an average of $700 a month on my new card. After two years, at 1 point per dollar, this means I will have accrued 18,000 points -- bringing my total to something in the neighbourhood of 33,000 points.

What does that do for me? According to the handy chart they provide, 30,000 points earns me a flight anywhere in continental North America. So essentially, for $240 (two years' worth of annual fees) I get a flight anywhere in North America. And having seen what friends pay to visit family on the West Coast, I know those sort of long-haul round-trip flights can easily cost close to $1000, and certainly over $500, even when you get a deal.

It's not perfect, and I acknowledge there are great credit card deals out there that give you things like cash back and gift cards at retailers that you don't have to wait two years to build up enough points to make it worthwhile to redeem. Which is why I doubt I'll renew the card for year 3, when RBC isn't offering me any free points to stay with the card.

In the meantime, it's a nice little financial experiment I've undertaken for myself. Meet me in California in 2008 if you want to tell me I've made a mistake... :)