Credit cards can play an important role in your financial portfolio. There are many credit card programs out there willing to give you free stuff for using their cards. Using a credit card more than a debit card often makes sense these days given that a lot of chequing accounts have limited use amounts for debit transactions to avoid fees.
If you carry a balance on your credit card then the first priority for picking a card should be ones offering low interest rates. The potential points you could earn are not worth the interest fees you will be charged. I will not be addressing low interest fee cards in this post — only ones with a points system (usually meaning high interest rates).
When picking a credit card points system you need to cost out the reward you will receive in order to compare. If there is a fee associated with the card in order to receive the points program, in my experience, this never equals out to a financial plus.
I want to share a good points program card I have found in my research. It’s the CIBC Shoppers Optimum Visa card. You receive 3,000 bonus points for signing up and then receive 5 points for every dollar you spend. Interest rate is 19.5%. You also receive 50% more points when you use your card at Shoppers Drug Mart with your Optimum card. If you spend $15,000 a year on your credit card (which is the amount I was using to compare cards), you will receive 75,000 Shoppers points, this equals their highest reward level of $150. This reward ‘cash’ can be used to buy anything at Shoppers Drug Mart. You can likely earn more than just the 75,000 points for $15,000 because of bonus points and extra redeeming programs through Shoppers (for example at certain times of the year for the 75,000 points you actually receive a reward of $200). It gives you the most value to reach their highest reward level before cashing in, although technically you can start redeeming for ‘cash’ at 3,500 points (value of $5). See the regular points table here.
Points earned at Shoppers are good value for money for two reasons. First, items available for purchase at Shoppers Drug Mart are extremely varied (you have a lot of choice on what to buy). Secondly, although you can choose to buy ‘fun’ items you can also use it to buy necessary items that would already be in your budget, thus saving money (ex: toothpaste, shampoo, makeup etc).
Credit card point systems are most associated with travel rewards. However it can be to your advantage to search for cards giving you rewards at retail stores you actually use. At a $15,000 level of spending travel rewards points will just not offer you yearly value. It would likely take you 2 to 3 years to save up points to receive a mid sized trip. So although over the long run, you might gain more ‘cash’ value from these cards, the long wait before you can redeem does not always make it. If you have a higher level of spending you can put on your credit card, these travel programs may offer you more value. If you want to pick a travel rewards program you should pick one tied to an existing travel rewards entity (not a private one) – for example Aeroplan or Airmiles – this is because you will be able to earn points faster since you can earn in other circumstances such as when you take a flight that is not bought on points.
Some locations to start your research are CIBC (they offer a fairly large collection of cards with points programs) – and Citizens Bank (who offer some innovative points programs tied to charities).
The bottom line when searching out a credit card points system is to estimate how much you can put on a card a year, how many points that will earn you, and what the ‘cash’ value of those points are. This will help you make an informed decision and make your money do some work for you.
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