Weekend Reading: New Rewards Credit Card Edition

By Robb Engen | July 4, 2020 |
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Weekend Reading: New Rewards Credit Card Edition
Long time readers know that I’m passionate about earning and redeeming credit card rewards. It makes good sense to earn cash back or travel rewards on your everyday spending. Some of us may have even become slightly obsessive about maximizing the rewards on their spending – applying for multiple cards every year to take advantage of welcome bonuses and other deals.

One topic I don’t write about often is which rewards credit card is best. The answer depends so much on where you shop, what type of rewards you want to earn, and how you want to redeem your points. Your mileage may vary.

Plus, for several years, I tried to collect as many Aeroplan miles and Marriott Bonvoy points as I could to redeem for travel, which meant the best credit cards for my situation were unlikely to be suitable for the average consumer.

More importantly, the one credit card I did use for my everyday spending (when I wasn’t churning other cards) was no longer available for new applications – so telling people about it was a waste of time.

You see, I’ve used the Capital One Aspire Travel World Mastercard as my everyday card since 2012. It offered 2 reward miles per $1 spent on anything and then allowed cardholders to redeem those points by “erasing” a travel purchase off of their credit card statement. It came with a $120 annual fee, but that was mostly offset by a 10,000 miles anniversary bonus each year.

The Aspire Travel card rebranded as a “World Elite” Mastercard in 2015, but existing cardholders were grandfathered under their old agreement. Then, in 2017, Capital One closed the card to new applications, citing changes to interchange fees that, “made this product unsustainable.”

Surprisingly, existing cardholders continued to earn 2 miles per $1 spent anywhere and continued to receive the 10,000 bonus miles every year on their card anniversary. That has been better than any rewards credit card on the market for the past three years and so I’ve kept using it for everyday spending. 

The TL;DR version of this story is that I received a letter this week from Capital One stating that as of August 5, 2020 the card will only pay 1.5 miles on every dollar spent, and the 10,000 anniversary reward miles has been discontinued.

It’s time to compare rewards credit cards and see whether I need to make a change.

Rewards Credit Card Comparison

Any search for a new rewards credit card must start with an analysis of your own spending. Many cards offer point multipliers for categories such as groceries, gas, dining, or travel. 

Then there’s what I call the Costco effect. A Visa or American Express card may come with generous point multipliers for groceries, but that won’t help you if the majority of your grocery shopping is done at Costco, which only accepts Mastercard.

I examined our household budget and looked at our average monthly credit card spending (ignoring one-time expenses like house or auto insurance). I found we spent a total of $3,460 per month ($41,520 per year) in the following categories:

  • Groceries: $1,600 – Save On Foods ($1,050), Costco ($375), No Frills ($175)
  • Uncategorized / Other: $1,100
  • Recurring bills: $450
  • Dining out: $250
  • Gas: $60

Armed with those numbers, I went to my go-to credit card comparison site – Credit Card Genius – to find the best everyday rewards credit card.

I like this site because I can input all of my spending by category to determine the ideal card for my shopping habits. Here’s what I found:

  1. Scotia Momentum Visa Infinite
    • $120 annual fee
    • First year free
    • 4% cash back on groceries and recurring bills
    • $896 in annual rewards
  2. American Express Cobalt Card
    • $120 annual fee
    • 30,000 point welcome bonus
    • 5x points on eats and drinks
    • $770 in annual rewards
  3. Capital One Aspire Travel World Mastercard
    • $120 annual fee
    • 1.5 reward miles per $1 spent
    • $623 in annual rewards
  4. RBC WestJet World Elite Mastercard
    • $119 annual fee
    • $250 WJD
    • Annual companion voucher
    • $623 in annual rewards
  5. BMO World Elite Mastercard
    • $150 annual fee
    • 35,000 point welcome bonus
    • First year free
    • $611 in annual rewards
  6. Tangerine World Mastercard
    • $0 annual fee
    • Two 2% money back categories
    • $587 in annual rewards
  7. PC Financial World Elite Mastercard
    • $0 annual fee
    • 30 points per $1 spent at PC stores
    • $457 in annual rewards

I adjusted down my grocery spending for the Scotia Momentum Visa Infinite Card and American Express Cobalt Card since I can’t use them at Costco or No Frills. I also reduced my spending in dining, recurring bills, and general for the Cobalt card because Amex isn’t as widely accepted.

One more factor when choosing an everyday rewards credit card is to understand the net rewards (after fees) beyond the first year. How much will you receive once the welcome bonus expires and/or the annual fee kicks-in?

With all this in mind I concluded that the Scotia Momentum Visa Infinite Card will be my go-to rewards card for everyday spending after August 5. I also acknowledge that I’ll still need a Mastercard when I shop at Costco and No Frills. I already hold the RBC WestJet World Elite Mastercard and so I’ll use that one to earn 1.5% back on my spending at those locations.

I’m not interested in paying more in annual fees than necessary so I’ll cancel the Capital One card in the coming months. This change also spells the end for the Amex Cobalt Card – which I used to use for Save On Foods groceries and liquor store purchases but can’t justify carrying anymore.

This Week’s Recap:

Whew, thanks for staying with me through all of that.

This week I shared my biannual net worth update and checked in on my financial goals for 2020. I’m still moving the needle forward but it looks like I’ll end up short of my goal to reach $1M in net worth by the end of this year.

On day 45 of my Questrade saga I finally managed to open and activate my new corporate investment account and place a trade. Painful.

Weekend Reading:

Matthew Klint looks at why Air Canada continues to insist it has a legal right to deny refunds on cancelled flights.

The Credit Card Genius team posted an analysis of credit card trends and how consumer behaviour has changed during the pandemic.

Travel expert Barry Choi answers a popular question – should I travel right now?

Barry also guest posted on the Eat Sleep Breath FI blog and gave some travel hacking tips for families.

Morningstar’s Christine Benz, a former FIRE skeptic, shares why she now believes these people are actually onto something.

Des Odjick smartly shares her personal money system and how it flows from paycheque to funding necessities and short-and-long-term goals.

My Own Advisor’s Mark Seed takes a detailed look at how to determine your financial independence number.

Here’s a neat calculator from Rob Carrick – a pandemic power-savings tool designed to strengthen your finances in uncertain times.

The latest edition of SPENT looks at how quickly AirBnB has seen a rebound in bookings and revenue compared to hotels:

I’m sure this hits close to home for many parents: In the Covid-19 economy, you can have a kid or a job. You can’t have both.

Here’s how parents can help their adult children financially – without hurting themselves:

“Parents naturally want to help their kids, but they have to help themselves first,” says Dan Bortolotti, portfolio manager at PWL Capital Inc. in Toronto, who has talked parents out of helping their kids in the past.

“It’s not a value judgment,” Mr. Bortolotti says. “You might run out of money and you can’t sacrifice your own future for your kids’ future. Also, they have more time [to earn income]. You have to be careful that you don’t jeopardize your own future.”

Happy Go Money author Melissa Leong says boosting financial literacy in schools isn’t enough.

Confused about currencies? PWL Capital’s Justin Bender tries to make sense of your ETFs Loonie currency exposure in his latest CPM podcast.

Has Warren Buffett lost his touch? Yes, Nick Maggiulli argues, as the Oracle of Omaha (through Berkshire) has surprisingly underperformed the S&P 500 by 17% this year.

Speaking of underperformance, 2019 was another challenging year for active funds in Canada as 92% of them underperformed the index.

Finally, get ready for a long and fascinating read on how money forever changed us.

Have a great weekend, everyone!

Net Worth Update: 2020 Mid-Year Review

By Robb Engen | June 30, 2020 |
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Net Worth Update_ 2020 Mid-Year Review
It’s time for my biannual net worth update where I share all of the numbers on my quest to reach millionaire status by the end of this year. It’s not going to be easy, as the global pandemic has impacted everyone’s finances to some degree.

I want to start by acknowledging how incredibly fortunate we are to be in good health and have the ability to earn an income working from home. Despite the odd grumbling about home schooling and cancelled travel plans, we know how lucky we have it and are grateful every day.

Remember plans? We had plenty of them heading into 2020. After quitting my job back in December, we hoped to spend much of 2020 travelling around Europe, the U.K., and Victoria. We managed to squeeze in a trip to Maui for a week in February before travel restrictions were put in place indefinitely.  

As for our finances, well it’s been a year of transition. My wife and I originally planned to pay ourselves dividends from our online business. But then I had the opportunity to take the commuted value of my workplace pension, which came with a large cash payout. So, we shelved the dividend plan and decided to live off the pension payout for the remainder of the year.

I opened a locked in retirement account (LIRA) to house the remainder of the pension payout. I can’t touch this money until at least age 55 and it’s currently invested in the Vanguard All Equity ETF (VEQT).

The cash payout was more than we can spend this year and so I stuffed $30,000 into my TFSA to fully max it out for the first time since 2011. That felt good!

We also maxed out the small amount of available contribution room in both my wife’s and my RRSP.

How have my investments fared? Stock markets fell more than 30% in March, the fastest decline of that magnitude in history. But investments found a bottom on March 23 and have climbed steadily(ish) ever since. My RRSP is down 6.12% on the year while my TFSA is down 2%.

Finally, I opened a corporate investment account to start to invest excess business income beyond what we pay ourselves (nothing, this year) and beyond our operating float. I’ve included this new account in my net worth update to be completely transparent with how our finances are set up.

Now, let’s look at the numbers.

Net worth update: 2020 mid-year review

Total Assets – $1,070,597

  • Chequing account – $5,000
  • Savings account – $85,000
  • (New) Corporate investment account – $30,000
  • RRSP – $215,662
  • (New) LIRA – $140,875
  • Defined benefit pension plan – $0
  • TFSA – $81,625
  • RESP – $53,435
  • Principal residence – $459,000

Total Liabilities – $194,261

  • Mortgage – $194,261

Net worth – $876,336

You may have noticed the large amount of cash in our savings account right now (up from $35,000 in my last update). A good chunk of that is leftover from the cash portion of my pension payout and will be spent by the end of the year.

Now let’s answer a few questions about the way I calculate net worth:

Credit Cards, Banking, and Investments

We funnel all of our purchases onto a couple of different rewards credit cards to earn points on our everyday spending.

Our go-to card is the discontinued Capital One Aspire Travel World Elite MasterCard. We have a grandfathered version that pays 2% back on every purchase and comes with a 10,000-point bonus each year.

*Cardholders have received notice that the 10,000 bonus points have been axed and the 2% reward on spending will be reduced to 1.5%. In other words, time to find a new card.

Our secondary card is the Scotia Momentum Visa Infinite Card, which we use for non-Costco groceries and gas. Finally, we look for the best credit card sign-up bonuses and time our large annual spending (car and house insurance) around these offers.

Our joint chequing account is held at TD, along with our mortgage and kids’ RESPs. My wife has her own chequing and savings accounts at Tangerine. Our high interest savings account is held at EQ Bank, which pays 2% interest.

My RRSP and TFSA are held at the zero-commission trading platform Wealthsimple Trade. My LIRA is held at TD Direct, and the new corporate investment account is held at Questrade. My wife’s investments are held at Wealthsimple.

RRSP / LIRA / RESP

The right way to calculate net worth is to use the same formula consistently over time to help track and achieve your financial goals.

My preferred method is to list the current value of my RRSP, LIRA, and RESP plans rather than discounting their future value to account for taxes and distributions.

I consider a net worth statement to be a snapshot of your current financial picture, so when it comes time to draw from my RRSP/LIRA and distribute the RESP to my kids, my net worth will decrease accordingly.

Principal Residence

We bought our home in 2011 for $425,000 and developed our basement a few years later, increasing its value to $450,000. The next year I bumped up the market value by 2 percent (which is still less than its city-assessed value), but the local real estate market has since flattened – with nothing selling in our price range – and so I’ve left the value at $459,000 for the past three years.

Final thoughts

COVID-19 has certainly thrown a wrench into our plans and most likely killed any hope I had of reaching the million-dollar mark by the end of 2020. Still, this was always a stretch goal – something to strive for over the last 10 years. I won’t get kicked out of the personal finance blogger guild if it takes a few extra months to make it.

Again, we’re so fortunate to be able to get through this pandemic with a few mild annoyances while still improving our financial position. The same can’t be said for many other Canadians.

Have you managed to keep your finances on track in 2020? Let me know in the comments.

Weekend Reading: Master Class In Retirement Planning Edition

By Robb Engen | June 27, 2020 |
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Weekend Reading: Master Class In Retirement Planning Edition
Fred Vettese is a leading expert in retirement planning and his books, which include The Essential Retirement Guide and Retirement Income for Life, are must reads for retired or soon-to-be retired Canadians. The newly updated second edition of Retirement Income for Life will be released on October 20, 2020.

The Rational Reminder podcast had Mr. Vettese on as a guest this week to explore the vast topic of retirement income. The conversation, according to co-host Cameron Passmore, was nothing short of a master class in retirement planning. Indeed, it was.

Those familiar with Mr. Vettese’s writing will know he’s a big fan of delaying CPP until age 70 – with the specific intent of spending personal savings from age 65 to 69 to fill the gap in retirement income. Deferring CPP by five years not only enhances your benefits by 42%, but it may also increase that amount by up to 50% thanks to annual indexing of both the benefit and the CPP maximum.

He’s less enthusiastic about taking OAS at 70 due to a lesser enhancement (only 36% if you defer five years), and because it’s difficult to convince people to defer both pension programs while they spend down their own personal savings. Mr. Vettese did say that at age 67 he still has not applied for his own OAS benefits and will likely wait until age 70 to do so.

Annuities were a big topic of conversation but, while Mr. Vettese is a fan of ‘pensionizing’ a portion of your retirement income, he’s not thrilled about today’s ultra-low interest rates and how that impacts annuity payouts. Furthermore, he said to avoid annuities index to inflation (if you can even find one) because they are more expensive and instead opt for a joint and last survivor annuity that’s payable for life for you and your spouse.

The indexing argument was interesting, as Mr. Vettese looked at longitudinal studies in Germany and Britain that showed how spending in retirement closely tracked inflation during their 60s, and then seemed to slow down rapidly from age 70 to 75, and then keeps on slowing down throughout their 70s and into their 80s. 

The conclusion taken from these studies was that the kind of income people should be looking to secure for themselves in retirement would be an income that’s growing with inflation in their 60s, and then growing with inflation minus 1% in their 70s, and inflation minus 2% in their 80s – which means no inflation adjustments to their income at all after age 79.

There was a bit of a “this time is different” tone to the conversation as Mr. Vettese explained why low interest rates are here to stay for the foreseeable future thanks to our aging population.

I find Mr. Vettese’s arguments refreshing as he takes an evidenced-based view on retirement planning and offers contrarian conclusions about saving, investing, and spending in retirement. No, we don’t need to spend 70% of our pre-retirement income in retirement. We can also spend more than 4% of our investments, especially if we can defer CPP to age 70 and lock-in that enhanced benefit for life.

Listen to the entire episode to hear what was truly a master class in retirement income planning.

This Week’s Recap:

No new posts from me this week – our kids completed their ‘at home’ schooling last Friday so they’re officially on summer break. That meant slower mornings and more time spent outside enjoying the beautiful southern Alberta weather. 

Our new hot tub was delivered and installed on Monday. We also had some minor roof and siding repair completed this week. 

I’m on day 39 of trying to set up a corporate investing account at Questrade. The process is already cumbersome due to required extra documents such as a personal guarantee that must be notarized and mailed in. Despite receiving all of the completed documents on June 16th, the account still hasn’t been approved and opened for trading. Frustrating.

Look for my bi-annual net worth update next week as I document my journey to achieve a $1M net worth by the end of the year. Spoiler alert: the market crash in March did not help the cause.

Many thanks to Rob Carrick for including my post about asset location in his latest Carrick on Money newsletter.

Weekend Reading:

Credit Card Genius explores a topic near and dear to me – is credit card churning a lucrative hobby or risky business?

The FIRE movement attracts a special kind of person who wants to escape the drudgery of a 9-5 cubicle and live on their own terms. Here’s why the early retirement portion of FIRE is the wrong goal.

One of the biggest influences on the FIRE movement is Mr. Money Mustache, and in this exclusive interview he breaks down how you can slash your expenses and save far more money while still enjoying life.

Speaking of enjoying life, the idea of a four-day work week has been tossed around lately. Canadians want a four-day work week, but would it work?

Millionaire Teacher Andrew Hallam says retirees need these two things to boost their odds of success.

Deferred Sales Charges (DSC) have been banned in most provinces, but not in Ontario – where its DSC rules promote wealth inequality.

How has personal income been affected by COVID-19? The latest episode of SPENT looks at income loss by age, as well as who has seen the most outright job loss and who has more partial declines in income:

The incredible amount of government stimulus handed out during the coronavirus crisis gives us a real-life experiment of what a universal basic income might look like and what it could accomplish. But did you know that, 46 years ago, Canada ran its own universal basic income experiment in Dauphin, Manitoba?

“At the time it was the most ambitious social science experiment ever to take place in Canada, and saw rates of hospitalisations fall, improvements in mental health, and a rise in the number of children completing high school.”

Meanwhile, studies in the U.S. found that the vast amount of federal aid has capped a rise in poverty, but warns that families could again be vulnerable if/when aid expires next month.

One of the key differences between a calamity like the Great Depression and the economic crisis we’re facing today is the policy of the federal reserve

A terrific post by Barry Ritholtz about how past claims of radical change fail to pan out, and why you should be skeptical every time you hear, “this changes everything.”

Rob Carrick says deferring OAS payments is a helpful retirement income strategy with a public relations problem.

It seems like everyone is getting into day trading or at least dabbling in individual stock investments. Morningstar’s Christine Benz explains why individual stocks is not the best way to get started with investing:

“I know that many people learned about investing through their Disney shares yadda yadda but I think we need to be clearer about this when we discuss financial education.”

Speaking of day traders, here’s what investors can learn from all the new Robinhood traders and a professional poker player.

The above piece references Barstool Sports founder Dave Portnoy, who now leads an army of former sports gamblers turned day traders. A Wealth of Common Sense blogger Ben Carlson goes back in time to profile Joe Granville, the original Dave Portnoy.

Annie Duke and Morgan Housel explain what the coronavirus pandemic and the resulting market volatility has to teach us about risk, uncertainty, and investment decision making.

The Sustainable Economist Tim Nash takes an in-depth review of Wealthsimple’s new SRI portfolios. His TL;DW – “Very promising. Won’t make everyone happy, but a welcome addition to the market. The strictest I’ve ever seen on gender diversity at the board level.”

A common question these days: should you exit a defined benefit pension plan? Here are my thoughts from my own pension decision.

Pattie Lovett-Reid talks COVID-19 and setting up seniors for financial success. Some good points on wills and power of attorney.

We know that high mutual fund fees can steal thousands of dollars from your retirement savings — so here’s a better way.

As hotels prepare to re-open, guests can expect plenty of changes such as mandatory masks, plexiglass shields, contactless check-in and no coffee makers in rooms.

Finally, last year Squawkfox money blogger Kerry Taylor was diagnosed with Triple Negative Breast Cancer (TNBC). She bravely shares her experience with breast cancer, including early detection, in hopes this could save someone’s life.

Stay healthy, everyone!