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A man holds a smartphone in this photo illustration showing the Canadian Tire app in Toronto Sept. 5, 2014.MARK BLINCH/Reuters

Canadian Tire money, known for its fictional Scottish character Sandy McTire, is going digital.

Canadian Tire says it's expanding its rewards program next month by offering a digital option to customers who want to collect and redeem Canadian Tire money on a card or smartphone.

But the retailer wants its customers to know that the addition of the new digital option does not mean it's getting rid of its much-loved Canadian Tire paper currency.

"It's a much easier option for Canadians, especially those who prefer digital forms of rewards," said Carol Deacon, senior vice-president of loyalty and digital at Canadian Tire.

"But we do know that a lot of Canadians like paper money in its current form today and will continue to offer it as an option," Deacon said.

Deacon said Canadian Tire didn't consider eliminating paper currency because it knows Canadians cherish the paper bills, first introduced in 1958.

"It's part of our heritage," she said. "It's been around for 50 years. It's really a second currency for Canadians."

The new program will launch in Nova Scotia on October 10, and in the rest of Canada on October 28.

Chief operating officer Allan MacDonald said the new program allows customers to easily manage their account and redeem rewards on their smartphone or online.

He said Canadian Tire learned many lessons about what it wanted its digital rewards program to look like after a pilot version was launched in Nova Scotia in 2012.

It found that those who had a loyalty card did not necessarily buy more items during each trip, but they shopped with frequency.

The digital loyalty program also allowed Canadian Tire to send customers tailored deals and specials based on their shopping patterns. For instance, the retailer was able to learn that if one family had children who were hockey players, it would send specials on hockey equipment at the start of a season directly to them via the app or email.

This allowed the retailer to ensure there was enough product in local stores to meet expected demand.

MacDonald said customers who pay with credit, debit or cash will receive a base rate of 0.4 per cent of Canadian Tire money in paper or digital currency on all purchases. Those with a Canadian Tire Options MasterCard will receive four per cent. With paper Canadian Tire money, customers had received a rebate based on a sliding scale of purchases made with cash or debit.

Canadian Tire money was created by Muriel Billes, wife of Canadian Tire's co-founder A.J. Billes.

The bills are available in denominations of 5, 10, 25, 50, $1 and $2 and allow consumers to redeem towards eligible purchases.

There has been more than $1-billion of Canadian Tire money in circulation since its inception.