(Editor’s Note: This post is part two of a three-part series about credit cards (for part one, click here ). Given the topic of these posts, I want to offer a disclaimer: I am not a financial expert. I am simply sharing what has worked with us. If you’re looking for actual advice on credit cards – or anything financial – I recommend speaking to an expert. Personal finance is personal, meaning what works for us might not work for you. Now, on to today’s post)
I didn’t put a lot of thought into choosing my first credit card. In fact, I didn’t put any thought into it at all.
Instead, I did what I am sure many 19 year olds do: filled out the first and only form the teller at the bank gave me and lied when I checked off the box stating I had read the terms and conditions.
I didn’t shop around for better rates, I didn’t take any time to consider the perks associated with the card and I sure didn’t ask any questions.
Writing that makes me cringe now but…I was 19, you know? Thankfully, I have learned a lot over the last 10 years.
In fall 2018, I started thinking about finding a card that could offer better perks. My trusty VISA had served me well over a decade of use, but I wondered if there might be a card out there that would offer a little more in terms of tangible benefits.
After spending some time thinking about what I wanted in a credit card, I started shopping around. Here are some of the things I kept in mind when trying to find the best credit card for my current lifestyle.
Another credit card? Is that really necessary?
That’s a fair question.
Did we need another card? Obviously the answer is no. Between our existing credit cards, we have more than enough credit, not to mention both cards earn rewards (RBC points for one, cash for Canadian Tire for the other).
These two cards have served us well over the years and we’ll keep both of them. But I wanted to test the waters and see what else was out there.
Aren’t you worried about blowing your budget?
Nope.
I touched on this in the first post (you can read that here), but essentially, it comes down to this: we generally use credit cards the way we use a debit card. That means if we don’t have the money for it, we don’t buy it.
There are a few exceptions – for example, if there’s a good sale, I might purchase something and charge it with a plan to pay it out of next week’s budget. By and large, the rule I go by in these scenarios is that so long as it’s an amount I could comfortably pay out of savings, I don’t worry too much about it. This has been working well for us.
Factors I considered when looking for a new credit card
There are four key things I looked at when considering my options for a new credit card.
The Credit Limit
This is how much you can spend up to on the card. This varies from card to card and is dependant on a lot of different factors, like your credit history.
Why does this matter? You are responsible to pay back your credit card. While cards with big limits can be tempting, what good is it to have a card with a limit so high you can’t pay it off?
I already have a card with a higher limit, so I wanted to keep my second card low.
The Fees (all of them)
Some credit cards have an annual fee. It’s also important to know about the penalties and fees associated with late payments or if you exceed your balance.
Why does this matter? Is a card that can offer you two per cent cash-back worth it if there is also a $60 annual fee? Maybe it is, but maybe it’s not. Understanding the financial terms of your credit card helps determine whether or not the benefits are really worth it.
In my case, I wanted to find a card without an annual fee. As part of my research, I made sure to read up on the details associated with penalties and fees, too.
The Interest Rate
And, most significantly, whether or not the interest rate is subject to change after the introductory period. One big factor in determining your interest rate is your credit history. The higher the score, the lower the interest rate.
Why does this matter? All the perks in the world aren’t worth it if you carry a balance and get dinged with 19-20 per cent interest!
I have never in my life made an interest payment on a credit card. This is not something I worry about so much, but it is definitely something that merits serious consideration when choosing a credit card.
The Rewards
This is what put me on the hunt to begin with – a lot of credit cards offer some form of a rewards program.
Why does this matter? If you’re committed to getting a credit card, you may as well have one that can offer some perks when you use it.
There are a ton of different ones out there, with options in many different niches. Our primary card offers RBC rewards, which have been great for gift cards over the years. That said, when I started looking at options, I knew I wanted one that offered cash-back.
Our new credit card
In the end, I choose the Tangerine Money Back Credit Card. I applied at the end of September and it arrived in my mailbox in early October.
We’ve been using it for a few months now. How do I feel about it?
The short version? I like it a lot!
The long version? Check back on Thursday where I’ll be sharing my full-review.
Final Thoughts
Like I said before, credit cards aren’t for everyone. Similarly, the decision to ditch credit cards and go all-cash isn’t for everyone, either. At the end of the day, personal finance is just that – personal.
If you’re going the credit card route, do your research. Make sure you know the ins and outs of your card and how it works. Trust me: you’ll be thankful in the long run.
I remember my first credit card, it was the BMO Mosaik (or Mosaic?) card and it had a pretty beach scene on it. I got it when I was in university (with like very little income). Ahh memories!
I was almost going to get the Tangerine card too but I didn’t like that it only limited me to 3 categories. So I got the Rogers Mastercard instead.
Oh man, I feel like BMO credit cards were popular among students at my university. Likely had something to do with the fact that there was a BMO branch attached to the bookstore at the time (convenient, since books cost an arm and a leg). Memories, indeed!
Re: wanting more categories – that makes sense! This is my first foray into cash-back cards, so I’ll be interested to see how I feel about the card over time. Honestly, right now, I’m mostly wondering why in the world I waited so long to get a card with better benefits. Live and learn!