Column: Loyalty could cost you a fortune

I cry during dog movies.

This quote from the lead character in Disney’s movie Togo did it for me: “I always thought he lived for the sled. What he lived for, was me.” I’ll bet many of you will stifle a tear just reading that sentence!

There is no purer example of loyalty in this world than a dog. Many companies out there would like us to follow the example of Togo when purchasing their products or services. That’s not necessarily a bad thing if we are receiving a superior level of service, but we need to exercise caution.

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I am loyal to companies that provide me with quality service at a reasonable price. If they give me something extra in return for my loyalty, that is a bonus. Things go off the rails when I get addicted to the points, discounts, prizes and free stuff in return for only adequate value.

My coffee rewards saga is one such example.

Several years ago, I downloaded a popular loyalty app on my smartphone and began using it to pay for coffee and the occasional sandwich or baked good. It seemed simple, but I had no idea how it would end up shaping my behavior. Looking back now, it involved a series of three deceptions.

The first deception was that it seemed not to cost me anything, as the account was automatically reloaded from my credit card. The second deception happened when I saw my points add up and, periodically, I would get to buy “free” items. The third deception offered me rewards to step up my purchases by visiting the coffee shop three, four or five days in a row or by buying certain combinations of items within a short period of time. Deception is a strong word and I do not fault the coffee chain – I made all the decisions! I would often end up buying into all the offers just to get the points. In hindsight, over the course of a few years, this habit was often costing me about $100 a month. I know others who are spending at least twice as much. There had to be a better way.

Using the Savings Growth Calculator on WealthSmart’s website, I figured that by diverting that $100 per month into a Tax-Free Savings Account (TFSA) instead could make a tidy little addition to my nest-egg. For instance, someone at the beginning of their career at age 25 could invest $100 per month into a TFSA at 6 per cent and end up with a $200,145 account!

I have nothing against coffee shops. I use them for business and social meetings or as a place to clear my head when I need to get creative. Starting this year though, I will also explore other coffee shops in our community or simply brew a fresh pot myself.

There are limits to my loyalty!

This column is part of a monthly series courtesy of Richard Vetter, founder of WealthSmart Inc.

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