Is your credit card working for you? Most Canadian households average two cards per family, giving you multiple opportunities to earn rewards from everyday purchases and other credit card uses.
While many families are quick to turn to low interest credit cards, the truth is most Canadians are actually quite good at paying off credit card balances—rendering a low interest card essentially useless. According to a 2011 survey, 64% of Canadians pay their balances off in full each month. Additionally, 93% of those who do not report that they pay at least the minimum amount each month.
Cash back cards can be a great way to earn extra money for your family. Cash back credit cards give a percentage of purchases back to the cardholder in cash. Typically these are calculated on an annual basis with the cash being applied to January balances, however many cards allow cardholders to cash out at any given time.
Here are 7 ways to get the most from cash back cards:
Use your credit card on every day purchases
Gas and groceries are the easiest way to rack up cash back balances—they also give the highest return on your purchases. Cards such as the MBNA Smart Cash MasterCard® Credit Card and Scotia Momentum® VISA Infinite Card offer up to 5% (for the first six months, up to 2% afterwards) and up to 4% respectively on these purchases alone.
If you're a single person or your monthly grocery and gas bills are light, the MBNA Smart Cash MasterCard® Credit Card is a better option. But if your family spends more money on these everyday purchases, it's worth it to get the Scotia Momentum® VISA Infinite Card even with the $99 annual fee. This card offers up to 4% cash back for up to $25,000. If your monthly expenses were $1,500, that would add up to $720 cash at the end of the year.
Consider using multiple cash back cards
Depending on your purchasing habits, using two different cash back cards might be an advantage. It might be a good idea to add a complementary cash back card that offers cash back on every purchase. Cards such as the RBC cashback card (no-annual fee) offer up to 1% on every purchase, plus an additional 25% extra cash rewards annual. You're essentially earning 1.25% on all purchases—no matter what, or where, you're spending.
Use your card instead of using cash or debit
Most cards offer up to 1% cash back on select retail and every day purchases in addition to gas and groceries, so use these when at participating stores to accumulate extra cash rewards.
Set up pre-authorized payments to your credit card
An easy way to effortlessly earn cash rewards is to set up your recurring monthly bills directly to your credit card.
Transfer your balance
Many cash back cards offer low balance transfer rates, which you can combine with introductory signing offers such as low interest rates. Transferring your balance means taking your existing credit card balance and transferring the balance to a new credit card at a lower interest rate; saving you more money in the long run and helping you pay off your debt FAST.
Check out our credit card tool to find the right card for you.
Wait for sign-up incentives
Credit cards regularly have sign-up deals and additional incentives. These come in many forms from instant cash back perks, to gas gift cards, and lower rates. As competition for rewards cards heats up in 2014, there will be numerous sign-up incentives offered from various companies.
Don't spend more than you can afford
It can be easy to get carried away with credit cards, especially if you're putting more on cards than you were before. If you're not paying off your balance or making your monthly minimum payments then you're not making your cards work for you. A general rule of thumb is not to use your credit card on items you can't afford. This way, you're always making money from your cash back cards not losing money to interest.