In a previous post I compared 3 cashback credit cards because we were considering getting a cashback card as our current credit cards do not have this feature. I particularly had my eye on the Tangerine Money-back credit card. What attracted me to this credit card was (this is not an endorsement):
- 2% cash back on 2 categories of your choice and 1% on all others. They currently have a promotional going on right now where they are offering 4% cashback for the 2 categories for the first 90 days.
- You can change your 2 categories each month so you can maximize your cashback. The categories include: grocery, restaurants, gas, drug store, furniture, entertainment, hotel/motel, recurring bill payments, home improvements, public transportation and parking.
- There is no limit to the amount of cashback you can earn each month.
- You can setup your cashback money to be deposited back into the credit card or into a Tangerine savings account. If you choose the savings account option, they give you a 3rd category to choose for which you can earn 2% cashback on purchases.
- The credit card includes purchase insurance and extended warranty for certain products. Not sure how this one works.
After some careful consideration and back and forth with my husband, we decided against switching credit cards or even getting another credit card.
Why? Glad you asked. Here are a few reasons:
- Cost of borrowing. Even though we try not to carry a credit card balance each month, the truth is we are human and we are at the early stages of financial independence. We have significantly improved our spending habits but have a lot more work to do. Our current credit cards do not have cashback, but they offer us a low interest rate of 4.20%. If we can’t pay off the credit card balance in full one month, we know that our interest expense will be low.
- Too much credit. I mentioned in part 1 of this post that I actually wouldn’t mind the credit score hit when cancelling one credit card and replacing it with a another. However, I did not consider that my husband would not be too excited about that idea. He did not mind us getting another card, but didn’t want to cancel any as it would take a hit on our credit score. That would mean having access to more credit, which kind of scares me to be honest. Even though we always keep our credit utilization extremely low and our credit score is very good, having access to that much credit can lead us to financial trouble in the future. I want to make sure that I am learning from my past experience and not making the same mistakes in the future.
- We would need to change our method of payment. This is probably the biggest reason why I am apprehensive on making the switch. My husband and I try and live within our means and not spend beyond our income. In making purchases, paying bills and taking care of daily expenses I would say we probably have 85% of our transaction amount as cash or debit transactions while the remainder on credit. This 15% on credit is not that we do not have the money (in most cases we do), but we want to ensure we keep an active credit activity. For example, every month we have preauthorized withdrawals from our credit cards for two charitable organizations and Netflix. Because we have the monies to pay this off this is simply to ensure that our credit cards are not dormant for a long time. My worry is that if we use our credit cards more, we will lose track and spend beyond our means. We use cash and our debit cards a lot so the money feels real. Groceries, gas, insurance, entertainment etc. we all pay for these expenses with cash or our debit card most of the time. However, in order to take advantage of a cash back credit card we would have to spend a lot more on credit.
There will be no credit card application for us in the near future. We still find opportunities to save on costs by using multiple loyalty points and coupons and I think that might be enough for right now.
Do you strategically use credit cards to earn cashback, travel hack or points? How do you find your spending habits when using cash/debit versus a credit card?