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Eeny, meeny, miny, moe: Which rewards credit card gives me more?

Managed to get my first credit cartomancy the summer before I attended university. The TD Emerald green credit-card-rewardsVisa. My reasoning behind picking this annual fee mastercard was that it had a lower rate of interest on balances, which is something nice to own. In hindsight, it appeared to be a dumb choice. I have never been someone to carry a balance on a charge card, and I find it hard to determine myself ever doing in which. In the end, I wasted the $25 on a charge card that I didn’t require. This wasn’t the newbie I made a inadequate decision on choosing credit cards.

Several years later… I made lots of other poor decisions. Managed to get caught up in gathering rewards. After having several charge cards, I wondered how many rewards I had been really getting for every single dollar I spent. Ended up Air Miles even valued at collecting? What was that difference between Scotia Bank’s dividend cartomancy and TD’s? I chose to do a little math to get an answer.

The actual Contestants.

I analyzed the most popular reward credit cards for Canada’s largest banks. I wanted to know for myself… what is the best cash back credit card in Canada?
Here’s a quick overview of the contestants:

	RBC Rewards Visa Gold No Annual Fee 1 RBC point per $1 spent
	American Express Air Miles No Annual Fee 1 Air Mile per $20 spent
	AMEX Air Miles Platinum $50 Annual Fee 1 Air Mile per $15 spent
	CIBC Dividend No Annual Fee 1% Cash back
	CIBC Dividend Platinum $80 Annual Fee 2% Cash back
	TD Rebate Rewards No Annual Fee 1% Cash back
	PC Mastercard No Annual Fee 1% Cash back on groceries

The outcome.

The particular graph below is really simple: the higher the slice for the given annual purchase, the larger the rebate. At $5000 with annual purchases, PC Mastercard (grey) will be the highest slice, but in $35 000 CIBC’s Dividend Platinum commences to overtake.

You can find two important lessons being learnt from this graph:

1. Annual fee cards are not worth the idea
2. Reward points offer under their cash rebate counterparts

Yearly Fee vs No Yeary Fee

All major rebate greeting cards have an annual fee option that lets you earn rewards faster. Such as, with CIBC you could possibly get their 1% Cash Dividend and also the Platinum 2% Profit Dividend (Scotia Bank includes similar cards). AMEX has the off the shelf Air Miles credit card along with the Platinum credit card. The annual fee cards seem like you have become more rewards, but as Pondered mentioned earlier, it’s most marketing.

Let’s take a review of the AMEX Air A long way Platinum card. With the Platinum cards you earn an Air Mile for each $15, instead of $20. Despite creating a higher reward rate, you happen to be collecting rewards with some sort of starting balance of -$50 rather then $0. In a way this can be like a Ferrari providing a Ford Aspire a new 100 m head start inside a 10 m race. The Ferrari may perhaps be faster, but the Ford Want has enough to complete the job.

The point at that the reward benefits are matched for AMEX Air Miles a credit card is at $26 400 in annual charges. That may be equal to $1 667 throughout monthly spending! The CIBC Rebate greeting card is no different since the Dividend and Platinum Dividend are generally equal at $30 000.

Annual fee cards do offer supplemental positive aspects, but most of any time these benefits are abandoned. They are definitely definitely not worth it for most people.

Encourage Points vs. Cash Refund.

vs.

Customers can get caught up in collecting points / miles, without knowing what they are really worth.  A benefit for reward points is that it allows marketers to hide a reward program’s worth behind numbers with no dollar value.  HBC is probably the best example I can think of. For every $1 you spend, you get 100 HBC points.  I have something like 24 000 HBC points and I can’t even buy a loaf of bread – I feel like I am in Germany during the 1920’s.  Looking at the graph, you can see that reward points credit cards (AMEX and RBC) are competitive with cash rebates cards when annual purchases are under $5000, but a gap begins to widen after this threshold.  Have you ever heard of a 0.5% cash rebate credit card? I have never seen one, but in reality that is what AMEX Air Miles and RBC Reward offer – it just so happens that they can probably get more cardholders if they stamp an Air Miles label.

If you buy a $1000 TV with a 1% cash back credit card, you’ve earned $10 in a rebate.  What if you buy that TV with an American Express Air Miles credit card? You know that you get 1 Air Mile for every $20 spent, but what is an Air Mile really worth? An Air Mile is worth 11 cents(more on this for another time), which means the effective rebate on the $1000 TV is $5.5. In the end, it’s worth it to stick with cash rebates

Here’s certainly one of how customers can get involved in blindly collecting items: When I was working at SportChek to be a cashier, I would have some customers buy something for $19. 99 and try in order to claim Air Miles (most of that time period these were moms). I might try to explain in order to these customers that Air flow Miles were rewarded for each $20 spent before duty, so an item offered at $19. 99 didn’t make any rewards. Some worth mentioning customers moms would invest in another item, often a $1 chocolate bar near to the register, to get the subtotal above this $20 threshold. Et voila! Weather Mile earned = Pleased Mom. Let’s break this particular down:

* Item charge: $19. 99
* Dark chocolate cost: $0. 99
* Incentive benefit: $0. 11
* Whole cost with reward help: $20. 87

I have known this expression “a penny saved is often a penny earned” for a while, but it has new meaning that really I am more aware that you earn more money when you don’t devote.

Final Conclusion

When Malcolm Gladwell
might claim, there is no such thing like a single best credit unit card. But there are favorable credit cards (emphasis on that plural). What does the following mean? The best mastercard for you always varies according to your situation. If Thought about to choose a single mastercard to recommend it will be the TD Kickback Rewards Visa or CIBC Dividend. The PC Mastercard includes a good rate, but this only applies if you ever mostly use your mastercard for groceries. If you happen to look for yourself in a situation that you’ll be spending $3000 a month on charge card purchases, then the CIBC Dividend can be for you and a vacation into the Caribbean.