When I am asked, as I often am, what is the best credit card to get, my answer as with so many things in the financial and consumer world is “it depends.” It depends on your spending patterns, it depends on whether you prefer cash rebates or more intangible rewards such as travel points, and it depends if you actually spend enough on a credit card to make paying an annual fee a cost-effective solution. My intent, then, is to introduce you to some of the many online tools you have at your disposal to help you select the best credit card for you.
I would like to preface all this by saying I’m not writing this post to encourage you to use credit cards. If you do not have the self-discipline to live within your financial means, then you should avoid using credit cards entirely. Do as the experts say: take them out of your wallet and freeze them in the middle of a block of ice to be thawed only when a credit card is absolutely essential, like when making a hotel or rental car reservation. Otherwise, just say no. Assuming, though, that you are a wise consumer (after all, you are reading this blog), let’s proceed.
Before using any of the credit card comparison tools, do an analysis of your credit card spending history. How much do you spend monthly on expense categories most likely to accrue bonus points on a rewards card? These would be things like groceries, gas, pharmacies, restaurants and travel expenses. You could also analyze whether you tend to carry a balance, since interest rates on credit cards is a point of comparison, but you wouldn’t do that, would you? After all, credit card interest is one of the most destructive forms of debt imaginable. Let’s say you carry a $1000 balance on a credit card with an interest rate of 19.99% (which is most of them). If you only ever pay your minimum payment, and keep running your balance back up to the $1000 range, you will be paying out $200 per year for the privilege. Imagine all the nice things you could buy yourself for $200. Think about it again and then pay off that balance!
Sorry, rant over. Once you have your spending analysis information in hand, it’s time to proceed to a comparison site.
I have three main credit card comparison sites I like to use. They have different strengths and weaknesses, so you may want to give each of them a peek to see which works best for you. I like to keep it simple, so the Boomer and Echo personal finance blog’s credit card comparison site works well for me. It basically narrows down to personal, student or business use cards. The site asks whether you want a low interest rate (irrelevant,right?), balance transfer, secured or rewards card. And if you’re interested in a rewards card (aren’t we all?) then it asks what kinds of rewards you are looking for – travel, cash back, gas rewards or other specialty rewards. Specialty rewards can be anything from Optimum points that you use at Shoppers Drug Mart through to Canadian Tire money. This site also offers specific recommendations on what it believes to be the best rewards cards in Canada and the best low interest credit cards in Canada. So if one of those is what you’re looking for, you can skip the comparison tool almost entirely and just look at the recommendations.
If you really want to scramble your brain with information overload, then the Rewards Canada credit cards comparison site will blow your mind. Tables of comparison variables, side-by-side and stretching wider than your computer’s screen width. A detailed guide to choosing various specific rewards type cards – travel rewards, hotel rewards, airline rewards, cash back rewards. If you have a favourite, they have a comparison chart. I actually find this site to be a bit much, and use it more as a reference when I’m trying to determine specific details about a particular card I’m considering. Want an earning ratio calculation? They’ve got it – particularly if it’s a tiered credit card, with various earning ratios depending how much your total spending amounts to annually.
If you want the people’s comparison tool, though, I would recommend using the Red Flag Deals credit card comparison tool. This one is a simple four-step questionnaire that will result in a recommendation tailored for you. The questionnaire is quite detailed too, especially when it comes to the extra features you may be looking for in a card. Warranties, convenience, travel and the main purpose for the card are all addressed. Usually when I use this tool it comes up with one, or maybe two cards as recommendations maximum. That allows me to then research those specific recommendations in further depth to see if it truly is a card that would meet all my needs. And if you’re looking for other people’s opinions on the benefits of a specific card, you can also use the Red Flag Deals personal finance forum to ask those questions. There are threads hundreds of pages long on some of the more popular credit cards on this site, so do some research – any questions you may have are likely already answered there.
Once you narrow down to one or two potential cards, pull out your spending analysis and run the numbers based on continuing your spending with that same pattern. Given that some cards have tiered earning rates, while others offer bonus rewards points depending on your spending category, a couple minutes of financial analysis can easily make the difference in selecting one card over another. Google is your friend if you’re looking for examples of how to do this analysis.
Other points to consider aside from the card comparison tools. Do you have an existing relationship with a financial institution that will help you get a premium credit card? As I’ve mentioned previously, I bank with TD Canada Trust. If you have a Select Service chequing account at TD, you will get the annual fee waived for one of their three premium credit cards: TD First Class Travel Visa Infinite Card, TD Platinum Travel Visa Card or TD Gold Elite Visa Card. I personally carry the TD First Class Travel VISA Infinite Card and find it suits me very well. But only because I get the annual fee waived. I don’t think this would be my choice if I had to pay an annual fee for it. Pretty much all the other Canadian banks have similar offerings – at the very least, you can often get their premium cards and have the first year’s annual fee waived as an introductory offer. Don’t hesitate to do that, and then call and ask to have it waived again come renewal time and if they refuse, cancel the card. There’s always another offering out there.
Another site you should consider checking out before you actually apply for a new card is Great Canadian Rebates (GCR). This is an affiliate site for just about any online vendor. Which essentially means they get a kickback from online vendors for referring members from their site to the vendor’s site, when the member then goes on to make a purchase. The beauty of the system is GCR is set up to pass on at least part of that cash kickback to you. This works when signing up for many credit card offerings online. So if they have an affiliate link to the card you’re thinking of signing up for anyway, make sure you join GCR and use their link to sign up for the card. You could get back anywhere between $5 and $100 for doing so. You can request your cash back in three payment methods: (1) an Amazon.ca gift certificate; (2) a Paypal payment; or (3) a cheque to be mailed to you. I’ve mentioned previously I like collect my mystery shopping payments in my Paypal account and then use that for Christmas shopping, so you can guess how I requested my GCR payment be made.
And that’s it – a fairly simple choice on credit card comparison sites to select the best credit card for you. Good luck and always spend within your means.