2. Get The Best Rewards Credit Card For You
Aside from a car or a home I don't recommend ever buying anything you don't already have the money for. I think of credit cards as convience cards, compared to debit cards they have added benefits of cash back rewards, free warranty extensions, and free travel insurance. You many not realize it but everything has an invisible credit card tax on it. Retailers are not allowed to say things cost more if you use a credit card (credit card lobbyiests got a law passed to make it illegal) so they have to raise the price of everything by 2% or more in order to cover the transaction fees (interchange fees) they get charged. So you might as well use a credit card to get some of that hidden tax back, unless you want to carry cash around and ask for a cash discount. I'm not talking about tax evasion, I'm saying some retailers will take 2% off the price if you pay cash because it saves them money. They are allowed to advertise cash discounts but most don't bother.
If you know you will buy more than you can afford if given credit you can get cards that you have to pre-load, and you can have it on hand for the handfu of times when you need a credit card. If you are already in credit card debt problems there are cards with no rewards but low interest which will help you get out of debt much faster.
If you have a card or want a card you might as well spend 10 minutes to figure out the best one for you rather than which ever one the bank happend to give you. When I mention this to my friend they often tell me they love the card they have, and it's gives them so many rewards so they don't want to switch. But when I get the details out of them the card usually gives them a 1% return or less, and they are usually eligible for a 2% cash back card. So those great rewards they are getting are great, until you realize they are only half of what you could be getting. And this could be hundreds of dollars a year.
Step 1. Figure out what rewards you are getting, if any
- If these are travel rewards or other merchadise rewards ask yourself if you are redeeming them for things you'd buy anyways. Like, if you get free movies from the card are you going to more movies then you would if they weren't 'free'?
- Try to calculate the % back you are getting, take the value of the reward and divide it by the amount of money you spent on the card to get it, then multiply by 100.
example: Let's say you need to spend $10 to get 1 Air Mile, and you need 95 miles to get something, you spend $950 to get that reward. Let's say the reward is $10 gift card.
So $10 Gift Card / $950 spent = 0.01, multiply that by 100 to get 1%.
Step 2. Compare your card (or other current cards) to these ones
Note: the higher your credit rating and the higer your income the better cards will be available. Unless you're really going to get into this I'd avoid travel cards and I'd stick to cash back cards. Travel cards can make you end up spending more by getting you to go on more trips than you would if you got a cash back card.
A good starter card
Tangerine Mastercard, you can pick two categories of items to get 2% cash back on and everything else you get 1% cash back on.
A better card for those who can get it
MBNA Rewards World Elite (owned by TD Bank), you get 2% cash back on everything, and lots of free insurance, like doubel the warrenty on everything you buy, and 90 insurance if anything you buy gets lost stolen or broken.
A credit card you can transfer a debt to and get 12 months no interest
MBNA Platinum Plus Mastercard, 0% interest on balence Transfers for 12 months, after that and for all purchases it has the usual 19.99%. Use this for a year to pay it down then move to a better card before you have to start paying the high interest.
A credit card that only lets you use money you have
There is a Visa card available at Petro Canada gas stations that you pre-load with money, but it acts like a Visa incase there are situations where interac won't work.
So how does your card stack up?