Maximizing Credit Card Rewards
|Not all rewards cards are created equally|
That's where credit card companies give you a small percentage of your purchases back in the form of a statement credit, bank deposit, or cash.
I want to preface what I'm about to say that cash back rewards are useless if you carry a balance. Earning 2% cashback is meaningless if you are paying 19.99% interest. It's dumb so don't do it. Really dumb.
Okay, now we got out of the way. How many credit cards does the Loonie household carry?
We have 5 credit cards.
I know. Crazy number of cards. Still below the average held by Canadians. No idea. I just made that up.
Anyway, why so many? Well, each one has its own purpose and advantages.
Our main card is the PC Financial MasterCard. This card earns us 3% at No Frills, Loblaws, and Shoppers Drug Mart. Essentially, most retailers under the Loblaws umbrella. Aside from that, it gives us 1% everywhere else. The rewards are earned as points and are redeemable only in No Frills and Loblaws. You also can get up to 3% at Esso, however, that's only if you buy premium gas. Otherwise, you get 2% at Esso. Which brings me to our next card.
The MBNA Cash Back MasterCard. This card gives us 2% for gas stations and groceries and 1% everywhere else. However, how you earn the rewards is quite complicated. Last I heard, you can only earn 2% for the first $400 you spend each month. If you spend money elsewhere... like paying your mobile phone bill, that amount only earns 1% and takes up the quota of your first $400. As a result, this makes this card solely a gas and groceries card. The good news is that most Walmarts are considered a grocery store. That means if you need to buy beauty/health supplies or electronics, you get 2% on those purchases. However, ever since Target left Canada, wifey and I haven't shopped at Walmart as much. Although, we have earned 2% on things like prescriptions and disposable contact lenses. Rewards are given as a statement credit, deposited to your bank account, or as a cheque when the amount reaches $50. On average, it takes us about 6-7 months to accumulate $50 in rewards.
There's no segway to the next card on our list so I'll just get to it. Wifey works for a major retailer in Canada and they have their own credit card. In order to get the employee discount, all purchases need to be placed on the card. In addition to the employee discount, we earn 4% (sometimes up to 20%!) for all purchases at this retailer. To maximize our savings, wifey is able to look in the system to see when certain items are on sale and how much discounted the prices are. The only problem with this card? You only earn 0.4% everywhere else. As a result, this card is only used at this retailer. With wifey's employee discount, we've helped friends and family make purchases so they could take advantage of the employee discount. My sister and her husband (married a few weeks now) bought winter tires. Wifey's friend's husband purchased a drill set. My parents have purchased all sorts of goodies from a microwave to kettles. One of our neighbours purchased two shelving units. All in all, a good way to save money.
The 4th credit card on the list is the Amazon.ca cashback Visa card. This card earns 2% on Amazon.ca purchases and 1% everywhere else. The 2% at Amazon.ca is useful. However, the main reason I picked up this card was the $10 sign up bonus. Just kidding. The sign up bonus was nice, but the bread and butter of this card is the no additional foreign exchange fees. When making purchases abroad, credit cards will charge up to 2.5% when converting currency to Canadian dollars. With this card, there is no extra charges. You just need to pay the daily rate that is set by Visa. So far, I've only made one purchase abroad (that was at Amazon.com), but there's no annual fees, so it's okay to hold onto the card. So far I haven't accumulated enough rewards to get a statement credit. However, the threshold is $20 in rewards.
Our last card is a TD Visa Rewards card. This was a card we picked up for wifey when she first arrived in Canada to build her credit history. You only earn 1% cashback on this card and rewards are deposited once a year. So why keep this card? No clue actually. However, this past year, Visa was pushing their Visa CheckOut service. I think it is a way to pay with your credit card without having to add your card to individual websites (remember the Home Depot and Target credit card hack problems?). Anyway, they had a couple of promotions we took advantage of. The first one was a free movie ticket if we paid for movie tickets with Visa CheckOut. Another was a $10 credit if we topped up wifey's Starbucks card with $25. At the time, we only had the one Visa card, so we couldn't take advantage of the offers twice. So I guess, that's another reason for the Amazon.ca Visa card. I haven't seen any additional offers for using Visa Check Out, so we'll see.
With credit cards rewards being as competitive as they are, there's a new credit card that arrived on the scene. Limited to a beta test of sorts, Tangerine recently launched a new credit card. Essentially, it gives 2% cashback on 2 categories of your choice and 1% everywhere else. You could also get a 3rd category if you elect to have your cashback rewards deposited to a savings account directly rather than a statement credit. This isn't a problem. Just an extra step to pay the credit card bill. If I recall correctly, the categories are gas, groceries, pharmacy, restaurants, home improvement, furniture, recurring bills, and something else that escapes me at the moment. In addition to all the categories, you can also choose to switch categories. My first thoughts are why not just make it 2% for everywhere. But whatever. There's no limit to how much you can earn. As a result, I foresee this card replacing the MBNA card (becoming more and more useless since TD purchased MBNA).
In addition to this regime of maximizing credit cards, wifey and I just recently discovered a "hack". At our local No Frills, they have a rack of gift cards. Gift cards are kind of useless. However, we discovered that if we purchase gift cards at No Frills, we get 3% cashback! Previously, wifey would top up her Starbucks card and earn 1%. Now we just need to buy a gift card and top up her card. This way we'd earn 3%. In addition to Starbucks, we saw gift cards for Sephora, Home Depot, and Amazon.ca! (This makes the Amazon.ca Visa redundant as 3% is better than 2%). The downside to gift cards is you'll either have not enough or too little. Oh well, even a little bit at 3% is better than 1%.
As you can see, I've obviously given a lot of thought to the whole credit card cashback rewards. All the cards detailed above have no annual fees. There are likely better cards available with annual fees. That's up to you to decide as I'm a no annual fee kind of guy.
If you really think about it, if you spend $20,000 a year, at 2%, that's $400 in rewards. That's not really a lot. However, if you're going to make the purchases anyway (like gas, groceries, prescriptions, etc), you may as well get something back.
Just don't carry a balance. Seriously. 20% of $20,000 a year is $4,000. That's much bigger than the $400 you "earn".