Should We Switch to Cashback Credit Cards?

I have been debating for some time now whether my husband and I should switch to a cashback credit card or keep our current credit cards. I have read many personal finance bloggers that are able to travel hack (collect points and use for travel) using their credit cards. Even though my main objective is not to save for travel, the idea of saving money as I spend money is appealing.

We have one credit card each that we regularly use. Each card has a 4 figure limit, 4.20% interest for purchases and cash advances and a $50 annual fee. The annual fee is to account for the low interest rate we receive. There are no cashbacks or reward points on these cards. We also have one U.S credit card when visiting the States or making purchases online in U.S. currency. This card has no annual fee or cashback/reward points but we got it to avoid the high conversion fee (between 1.5%- 3%) that Canadian banks charge for making U.S transactions. Conversion fees are in additional to the exchange rate charged. We have 3 credit cards in total.

My dilemma?  We pay our balance in full and when we do not, the balance is paid within 5-10 days. As it stands, we do not get any monetary benefit with the low interest rate credit card, except knowing that our cost of borrowing will be low in the event that we incur debt beyond the grace period.

Why the sudden desire to change? While we were paying off student loan debts, we shied away from all debts, even if we had the money to pay off the balance. We decided that we would operate using cash only. We would use our credit cards once a month to keep our credit activity active. Today we have debts paid off, a fully funded emergency fund and a game plan for retirement. I feel more confident about our money management skills; our spending habits and our savings behavior have improved over the last 3 years.

How would the cashback or reward points credit cards help us save? Although we would save money with each transaction, my biggest reason for getting this type of card is to earn money when buying groceries and gas. Groceries account for $520/month on our budget. With our Presidents Choice (PC) Plus loyalty reward card I am able to reduce this amount by $40-$60 depending on what items I buy and how many points they are worth. This however restricts us to shopping at one store. Gasoline accounts for $120-$200/month on our budget. We use Petro Canada loyalty card and OYNO (on your next order) coupons printed on Safeway receipts when we shop for groceries to save 5 cents per litre on gas at Safeway. Both these options restrict us to shopping at these stores.

What options were we considering? If we were to switch to a rewards or cash back credit card, it would be any one of these three financial institutions: Tangerine, President’s Choice and TD.

Tangerine PC Financial TD
Reward features Earn 2% cash back on purchases in two 2% cash back categories of your choice, and 1% Cash back rewards on all other purchases. The two 2% categories for us would be groceries & gas. Earn 10-20 points for every $1 spent depending on where you make purchases. 0.75% cash back on purchases charged to card.
Interest on purchases & cash advance 19.95% for both 19.97% and 22.97% 19.99% and 22.99%
Annual fee amount $0.00 $0.00 $0.00
How to redeem savings Cash back earned automatically & paid monthly towards the credit card or a savings account. No minimum cashback needed to redeem. Once you get to $20 worth of points or more you can redeem at Superstore grocery stores against cost of groceries. Cannot be redeemed for cash or to reduce credit card balance. Cash back earned automatically and paid when amount reaches $25 or more. Amount can be put towards credit card or savings account.
Other savings offered by card 1.5% foreign conversion fee. Fairly competitive rate.

(Standard rate is 2.5%). Balance transfers at 1%

Promotional balance transfers: 0.97% for 6 months if made within 90 days of account approval. Access to TDRewards.com to redeem points by purchasing items.

I was also considering applying for one of the credit card options above then having one of the existing credit card cancelled. This will ensure we have one credit card with the low interest rate of 4.20% and another credit card with reward points. Limiting the number of credit cards we have is important to us as it helps us manage our spending.

I know the consequences of cancelling credit has on a credit score, but we will not be shopping for credit in the near future (minimum one year).Having full knowledge of the credit impact and other factors this decision may have, I still think the idea is worth considering. The amount of cash we spend on a monthly basis can be applied to cards like these to provide us an opportunity to save. We have developed good financial habits and are no longer accustomed to making decisions based solely on our credit score.  With that being said, I am interested to hear what you think.

Do you think it is worth getting a cash back or rewards credit card? If so why?

 

 

Categories: Debt, Savings

Tags: , , , ,

18 replies

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  7. You can also plug your actual monthly expenses into the Canadian reward card calculator tool at http://www.creditcardtuneup.com/canada/ to quickly compare your earnings from the best calculated individual cards and card combinations, including cash back as well as travel rewards cards.

    Another option is the tool at http://siftswift.com/en-ca/credit-cards/

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  8. I’d be interested in what you choose! I’m in the same boat, and have been leaning towards Tangerine for some time now. I’ve only ever had one credit card, and it’s great for travel rewards, but I think a cash back card would be useful in those times when our travel account is already fully funded and when we’d rather put the rewards towards savings. The Tangerine card just seems to be the best fit for my situation. I’d love to read about what you find out!

    Liked by 1 person

    • Yah me too. I really like Tangerine and their credit card reward system seems appealing to me. I will definitely share on my blog when and if we finally decide to switch cards. I am leaning towards Tangerine and I think so is my husband, but we will see.

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  9. We use credit cards for everything. It’s great to get the rewards but I think it makes us spend more.

    Liked by 1 person

    • That is also a concern I have. I think I am good with my spending, but I do not want to tempt myself either. Right now I use cash to make my groceries and gas purchases. It is super old school but it actually limits my overspending. But the points and cashbacks are tempting.

      Liked by 1 person

  10. I’ve got the PC card and love it! Their customer service is fantastic and I like that my points cam only be used in certain areas. It saves me from myself and I use the points at Christmas to help out with groceries and gifts. I don’t shop a lot at PC stores as they’re not often the cheapest option but still have managed to accumulate over $200 worth of points.

    Based on that chart, if I didn’t adore PC, I would switch to Tangerine.
    I do love that you can get actual cash back with that one.

    Liked by 1 person

    • I know, I am leaning towards Tangerine as well. I like that they give you options of categories to choose from and that you can earn cashback towards your savings account. Like you said, PC does not always have the lowest prices. I think I might stick with my PC plus reward card for non-PC credit card holders and get the Tangerine credit card. That way when I make a purchase at Superstore I can get some points through PC and pay with a Tangerine credit card for cashback.

      Liked by 1 person

  11. When you can have the discipline to pay off the credit card the day the invoice comes, than a cash back is free money. When I see what others do with credit card rewards, I just wished I lived in the US to use the same tricks. Do you know this? https://cards.madfientist.com

    My credit card is linked to another account. Whenever I pay something with it, I wire the money to that account. as a results, I always have the cash at hand to pay.

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    • No I have not heard of that website before. I had a quick look and I don’t think it would apply to me because I live in Canada. You are right, you need discipline in your spending to really make the cashback and reward system of using credit cards to your benefit. I want to say I am good with using my credit cards and I think 90% of the time I am, it is the other 10% I am worried about. Since I don’t use my card often, I am comfortable with a few balances not fully paid every few months, but we are talking about only $100 or so. As long as this number doesn’t balloon, I think we would be okay to switch. Thanks for sharing the link.

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