I’ve written about this topic a few times before: I used to use my two credit cards like they were free money, maxed them both out in June 2011, finally finished paying them off in April 2012 and, a full year later, found that I still didn’t trust myself to use them responsibly. Now I can look back and see it’s not so much that I didn’t trust myself; it was that responsible credit card usage had never been part of my budgeting strategy. I didn’t “get it”. I didn’t understand how people could use their credit cards to pay for everything, and manage to pay off the entire balance and never be charged interest. How was that possible?
In July, it finally clicked. The problem, all along, was that I’d always used credit cards to supplement my income. I saw them as something that could help me buy what I couldn’t afford. So, of course I didn’t understand the concept of using them to earn rewards and be charged nothing to do so – that’s not how they worked in my brain.
Credit cards were what helped me live the life I wanted, even when I couldn’t afford it. Since starting this blog, however, I have learned how to live a good life on the income I make. If I want to do/buy more, I do some freelance work to pay for it – I do not turn to my credit cards. In fact, when I became credit card debt-free, I only kept one credit card (because I’d had it since November 2004, so it held all my credit history) and I barely used it; that changed, after all of this finally clicked.
Once I realized that I probably had what it takes to be a responsible credit card user, I did two things: evaluated my monthly spending and researched the best credit cards in Canada. I’ve been tracking my spending and writing monthly budgets for exactly three years now, so I had lots of history to review. I focused on what I’d spent each month in 2014, and with that I was able to fill in my spending profile on RateHub.ca’s credit card comparison chart. Based on my spending profile, I knew I’d get the most rewards with either a cash back or travel rewards credit card. I did a little extra research on the side, then decided that for budgeting purposes I would test out the best cash back credit card: the Scotia Momentum Visa Infinite*.
I say “test out”, because I wanted to see if I could spend enough money in a year to counter the $99 annual fee that comes with this card. See, when you get a rewards credit card that has an annual fee, you want to spend enough so your rewards not only make you breakeven, but come out ahead – way ahead. (If you can’t do that, look at some of the no fee credit cards that also come with rewards.) Currently, the annual fee on the Scotia Momentum Visa Infinite is being waived for the first year, so I figured there was no harm in making it my test subject. I applied, was approved and, for the past four months, I have used my new credit card to pay for absolutely everything. Has the test been a success? Take a look:
In just four months, I have earned $162.35 in cash back. If you do the math, that means I’ve spent $11,259 ($2,814.75/month) on the card; that’s a big number, but remember that I also pay for some things each month that work reimburses me for, and freelance has helped me pay for a couple flights that I later charged to the card. If I continue on this track, I could earn as much as $487.05 cash back this year (because the annual fee is being waived). If I had to pay the $99 annual fee, though, that would still give me $388.05 cash back (which Scotiabank applies to your November bill). So, I’d say the test has been a successful one! On top of the cash back I’ve earned, I’ve also taken advantage of some discounts only Visa Infinite holders get, and I feel good travelling with a card that has so many travel insurance policies attached to it. Would it surprise you, then, if I said I’m still not sure this is the right rewards credit card for me?
For as much travelling as I’ve done this year, I’m starting to think a travel rewards credit card might be a better fit for me (and my budget). I don’t really know why I hadn’t thought of that before, but since I want to do even more travelling in 2015, I’m keeping my eye on this card. I think I’ll wait until January to apply – or I may not apply at all, who knows. It’s just something I’ve been thinking about… I’ll keep you posted!
Do you use a rewards credit card? What type of rewards do you earn?