Save. Spend. Splurge.

How to calculate if anything, like a points program (like PC Points) or a deal is worth it

I understand that we aren’t really taught how to compare prices, deals and cost-per-unit/use and so on in school, so if this is remotely helpful to people, I am happy.

I am using the PC Points program in Canada as an example, but you can do it with any points program really.

The main question to ask yourself in all situations is:

WHAT IS MY OPPORTUNITY COST?

By this I mean, what are you giving up, or locking in, to get those points or that money? What are you able to use that money for? What is it costing you, not just financially, but also in terms of changing the way you spend money or invest it?

I will give a few examples.

POINTS PROGRAMS

On the PC points site, they say:

Every 10,000 points is like $10 worth of free stuff. Redeem your PC Optimum points at special Spend Your Points events to get even more value.

Earn 15 points on almost every dollar you spend at Shoppers Drug Mart and Pharmaprix.

Earn How
PC Financial MasterCard® 10 points Per $1 spent on your credit card anywhere you shop.
PC Financial World MasterCard® 20 points Per $1 spent on your credit card at participating stores, and on PC travel and PC mobile services. Bonus of 2 cents per litre at Esso locations and 10 points per $1 anywhere you shop.
PC Financial World Elite MasterCard® 30 points Per $1 spent on your credit card at participating stores, and on PC travel and PC mobile services. Bonus of up to 3 cents per litre at Esso locations and 10 points per $1 anywhere you shop.

Participating stores, more or less all owned by PC themselves (I shop at maybe 3):

  • Atlantic Independent Grocer
  • Atlantic Superstore
  • Dominion
  • Fortinos
  • Loblaws
  • Provigo
  • Retail RCWC
  • Valu-Mart
  • Wholesale Club
  • Real Canadian Liquor Store
  • Your Independent Grocer
  • Zehrs
  • Real Canadian Super Store
  • Maxi
  • Extra Foods
  • No Frills
  • Shoppers Drop Mart
  • Pharmaprix
  • Esso
  • Mobil
  • Joe Fresh
  • The Mobile Shops
  • Loblaw Optical
  • Theodore & Pringle
  • Eyewear

So, how to do the math?

You need to figure out how many points you need before you can redeem it for a certain cash value.

If 10 points = $1 this means you need 10 points to get $1, or 10,000 points to get $10 (minimum redemption value).

So now let’s take those 10,000 points and divide it by the $10 redemption value you’d get; this answer will give you how much you need to spend to earn those 10,000 points to get $10:

10,000 / 10 = $1000 to be spent out of your money to earn an equivalent $10 to redeem at their PC stores in points

So this means if you need to spend $1000 to earn 10,000 points to redeem for that $10 value, the $10 value you are getting can be now calculated as a percentage:

$10 earned in rewards / $1000 spent on your card to earn that money = 0.01 in decimals

Convert decimals to percentage:

0.01 x 100 = 1%

So basically, if you earn 10 points per $1, that’s a 1% return on your money in points.

If you earn 30 points per $1 because you have a PC World Elite card that you use at PC stores, you get a 3% return in points to spend there again.

So what’s the catch?

The catch is you can only spend at their stores and their prices are all inflated to account for this points program. Period.

The whole point of this points program is to lock you into spending at their stores. This is why they have “PC DAYS” where you get 20X the points when you spend a certain minimum ($100, if I recall correctly). This is actually not that bad of a deal because it is a lot more points.

If you don’t care so much / can only access their stores ANYWAY without going out of the way to get cheaper prices, this is a moot point. But if you are regularly spending $300 there when you could spend $150 elsewhere, then this is not that great of a deal.

HOW DO I MAXIMIZE THIS?

Think about your opportunity cost. Are you really saving money by spending $150 more at these stores if their prices are inflated?

If you are able to obtain these points easily, or free, like signing up for their no-fee PC Money account, and then shifting a direct deposit over to them, paying small bills of $50+ out of that account, and earning points that way, then it’s worth it. I did this, and got $90 to spend at their stores (which I promptly used some of which on some contact lens solution), and I know if I ever need anything specifically from a drug or grocery store, I have a credit there.

But I am not going to go out of my way to ONLY shop at their stores if their prices are not competitive. Cash, not points, is still queen. Cash can be used anywhere, not just at PC branded stores. If I happen to buy something at their PC branded stores, I will use my PC World Elite Mastercard to buy it, and get 30 points per $1, or 3% back in equivalent points.

Otherwise, I am doing near-free-to-me transactions through the PC Money account to earn points easily, as I was going to pay a bill anyway, why not pay it through this account and get points for it?

(FYI – I use the Rogers World Elite Mastercard for 1.5% cashback as my general card, because frankly, nobody has the brain cells for this.)

COST PER UNIT

Another common one I see people are unable to calculate is cost per unit. Basically you have to equalize everything to base units, and then do the math there.

If it is $20 for 75 units, the math is simple at the core:

$20 / 75 units = $0.26 paid per unit

Now if you have $20 for 75 units, and $50 for 250 units, which is the better deal?

$20 / 75 units = $0.26 paid per unit

$50 / 250 units = $0.20 paid per unit

Clearly, the $50 one is the better deal.

CONVERSIONS ARE THE ONLY TRICKY BIT

Where it gets tricky is where you have to convert things between imperial and metric, like this one:

$20 for 8 ounces or $60 for 5 litres.

(OK this is an admittedly terrible example because it is evident to most which is the better deal, but this is not to trick you, it’s to show how to calculate it)

1. FIGURE OUT THE BASE UNIT

You need to figure out your unit of measure (I always recommend metric, rather than imperial as it divides nicely by 10), but you do you.

1 litre = ???? ounces?

A quick conversion chart, or google search tells you:

1 litre = 35.1950642 Imperial ounce

This means, you just multiply that by 5 litres to get it in ounces.

5 litres converted x 35.1950642 = 175.975321 Imperial ounces.

8 ounces = 8 ounces

2. NOW REWRITE IT WITH THE $$$

It was $60 for 5 litres, we figured it out, so:

$60 for 175.975321 ounces

And $20 for 8 ounces.

3. NOW DIVIDE IT TO GET THE UNIT COST

You have to see the same unit cost, like 1 ounce = 1 ounce comparison, otherwise it is going to not make sense.

$60 / 175.975321 ounces = $0.34 per ounce

$20 / 8 ounces = $2.50 per ounce

Done.

OMG I AM NEVER GOING TO DO THIS IRL

I won’t either. I round things up, they do not need to be precise. For instance, getting 1 L = 35.1950652, is 35 in my head.

Make things easier by not being too precise, a few decimals off here and there are not going to make a difference.

You can even round it up t the nearest ten, or hundreds, and divide there in your head. Or, everyone usually has a calculator on their phone; simply bring it out and use it.

INVESTING DEALS

A common one I see pop up from banks, is “Invest $5000 here, and get back $750!

Well, that math is pretty simple to work out.

$750 (your reward) divided by the $5000 capital = 15%

WHOA! A 15% return right off the bat? It does sound promising, until you read some more details:

It has to be invested ONLY in that fund they are promoting

This means the returns are not guaranteed to stay at $0 or increase, they could decrease and you could go down to $4000, which means you had $5000 and lost $1000 to earn $750. Net loss for you = $250

IT HAS TO STAY THERE FOR THREE MONTHS

Once you invest the money into this fund, you can’t withdraw it for 3 months. So if you needed the money before then, or if the fund was losing a lot of money, to get that $750 you have to leave it in there. Even worse, you’d lose that $750 if you withdrew it beforehand, AND you would have lost money at the same time.

(I am not saying this will happen, this is an example of working through all good / bad scenarios for this money)

YOU NEED TO PUT UP $5000

This is where you calculate where that $5000 could go instead.

$5000 in a high interest savings account could earn 1.25%, you would get 13.75% less as a return, but your money would be stable and not potentially lose more than 13.75%.

You could invest it in your index funds like you were going to anyway. I am not saying to take historical returns as a benchmark, but 10% has been the average return in the past years, so you’d only “lose” 5%, but the upside is your money would be invested for the super long-term because to get that 10%, you need to leave that money invested for 10+ years or more.

Just in one year, the market could go up 35%, but the next year, drop 10%, then go up another 15%, etc. To average the returns, you need to leave that money invested.

The reason why I would not want to take the deal personally, is because I don’t want to have to think about moving / selling that $5000 capital investment (whatever it ends up being at market value), to another investing account, and/or lose the contribution room and/or have to wait until January 1st of the next year to recontribute.

The cost of all of this is a HASSLE. I hate moving, and merging accounts, and I dislike shifting investments or changing funds, especially if this particular one was not doing that great (again, I have no crystal ball, it could also work out like gangbusters and be a 50% return, who knows).

BANK PROMO DEALS

Sometimes you can get creative. Another bank deal I got a while back was to obtain a line of credit at 0% interest.

I signed up, they approved me for $25,000 at 0% for the next 6 months, and I promptly withdrew all that money and put it in a high interest savings account, until the day it was time to end the 0% interest, and I put the money back in to clear the line of credit.

Why?

Because it earned me $156.25 without doing anything except shift money around (and take notes of when to transfer it back), and I got a $25K line of credit to use in the future (if ever), to boot. I could have invested the money instead, but then it would mean coming up with $25K in cash to clear the line of credit later, so I would not have to pay the 3% interest.

Alternatively, I could have leveraged that money, invested it, gotten a 30% return (in hindsight it is all 20/20), and netted out 27% in returns, but I do not have a crystal ball. I’d rather just invest the cash I have rather than leverage debt for returns (I am risk averse in that sense and dislike paying interest, as a personal, mental thing).

$156.25 is peanuts to some people, but it is $156.25 I did not have before I did this, which for me, is a bonus. A dollar is a dollar. Plus it was all done online, which made it very hassle-free.

And that’s it. Hope it helped.

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