2. Get The Best Rewards Credit Card For You
Warning: If you have a credit card it is more than likely you'll spend more money than if you pay for everything in cash. So if you're looking to spend the least amount of money possible consider not using a credit card despite the free cash back programs. If using cash for everything just isn't going to work or if you plan to do that but still want a credit card to help build a credit rating to be able to get a mortgage I recommend putting in a few minutes of effort to find the best card you can. I can't see any reason not to.
Aside from a car or a home I don't recommend ever buying anything you don't have the money to pay for. I think of credit cards as convenience cards, compared to debit cards they have added benefits of cash back rewards, free warranty extensions, and free travel insurance. You may 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 lobbyists 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 2-3% 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 handful 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 settle for which ever one the bank happend to give you. When I mention this to my friends 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. Meaning, they are getting ripped off! They might get $500 in free groceries, but that could've been $500 in groceries and another $500 to spend on anything else they want, or just $1000 in groceries!
Step 1. Figure out what rewards you are getting, if any
- If these are travel rewards or other merchandise 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'? If you're using the points for things you wouldn't buy anyways this equates to no reward, sometimes a negative reward because you spend more in the redemption process, like buying popcorn when going to a free movie, or paying for a hotel to go with a 'free' trip. For scenarios where you are using it for things you'd buy anyways try to calculate the % back you are getting. Just 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 divided by $950 spent (10/950) = 0.01, multiply that by 100 to see it is like getting 1% cash back.
Step 2. Compare your card (or other card offers) to these ones
Note: the higher your credit rating and the higher 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. (Here is a comparison)
A good starter card
This is going to sound odd but Rogers Media has some very good rewards cards, and no websites seem to promote them. They don't have fancy insurance plans, they just give you a lot of cash back.
No Fee FIDO Mastercard 1.5% cash back on everything
$29 Annual Fee Rogers Mastercard 1.75% cash back on everything. If you spend more than $1000 on your credit card per month you'll come out ahead with the Rogers card over the FIDO.
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 double the warranty on everything you buy, and 90 insurance if anything you buy gets lost stolen or broken. You'll need to spend $
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?
MBNA Smart Cash Platinum Plus (owned by TD Bank), you get 2% back on gas and groceries, 1% on everything else. And you get a bunch of features see this chart. There is a limit on the 1% cash back, it stops after you spend $1,250, but try calling to see if you can upgrade to the 'World' version rather than the 'Platinum' version to get unlimited cash back.
Links to Part 1, Part 3, Part 4 and the video