It was all about practicality when I applied for my first rewards credit card and started using it to earn free groceries. After a while I “graduated” to a cash-back credit card, which paid a higher percentage back on grocery and gas spending.
I liked the simplicity of funnelling my spending onto one no-fee cash back credit card and getting a little something back for my effort.
My attitude changed a few years later when I started doing research into travel rewards credit cards and other premium cards that came with loads of benefits along with an annual fee.
What I found was that some credit cards offered better perks in certain spending categories, but not in others. I decided I could maximize my rewards credit card points by using one card for groceries, another one for gas, one for dining and entertainment, and yet another for everything else, including travel.
Finding the best rewards credit card
So I applied for many credit cards over the next three years. The type of cards that found their way into my wallet typically came with big perks; sign-up or welcome bonus points worth hundreds of dollars in cash or travel, annual fees waived in the first year, and the ability to earn more points at partner retailers when you used your card.
I guess you could say I got greedy. I was addicted to finding the best rewards credit card and racking up rewards.
Most cards wouldn’t last a year in my wallet before I ditched them and moved on to the next round of tempting offers. The rewards cycle went something like this: apply for a credit card, cash in on the bonus offers, cancel the card within 12 months (before the annual fee kicked-in), and Bob’s your uncle.
I eventually realized what a dangerous game I was playing and ultimately came to my senses. Dangerous because I applied for so many credit cards, and had access to so much credit, that my credit score took a major nose-dive (shameful for a personal finance blogger).
Besides, it was a royal pain balancing my budget every month with spending on multiple cards – each one with a different due date. Enough was enough.
This time I’d go back to funnelling all of my spending onto one card. But which one? I thought about the cards that had staying power in my wallet, the ones I held onto for longer than a year.
What did they all have in common? High earning rates in lots of spending categories, not just one or two. Flexibility when it comes to redeeming points, including the ability to book travel with any provider and use your points to cover fees and taxes. Outside of the box incentives help, too, like free checked bags, priority boarding, or a complimentary airport lounge pass for you and a guest.
That may sound like I’m being picky but Canadians are a rewards savvy bunch and many are also looking to get more from the credit cards they carry. According to a recent TD survey, cardholders want and expect greater choice and flexibility for what their reward program offers, as well as new and creative ways to earn and redeem points.
Sound familiar?
The same TD survey said many Canadians own more than one credit card, with nearly nine in ten (89 per cent) owning a least one card for an average of 1.9 credit cards each.
This humble blogger thinks Canadians are leaving money (rewards) on the table by not finding one program that meets their needs and then sticking to it.
Here’s the thing: funnelling all of your spending onto one rewards credit card is the best way to earn points quickly and maximize the rewards potential of that program.
Final thoughts
In today’s competitive travel rewards landscape, it shouldn’t be hard to find a rewards program that let’s you have your cake and eat it too.
But, as the TD survey says, with such a wide variety of rewards programs available, and so many ways to collect and redeem points, make sure you understand how the earning and redemption mechanics of the card work in order to get the maximum benefit from it.
My advice is to dig into your budget and understand where you spend your money (and how much you spend each month). Only then can you determine which credit card rewards program best matches your spending.
This post has been brought to you in partnership with TD. All thoughts and opinions are my own.
It’s unusual for a big bank to go out of its way to offer something for free but to my surprise that’s exactly what happened when I called TD Direct Investing this week.
You see, before I sold all of my individual stocks and moved to a two-ETF portfolio at the beginning of last year, I had many of those stocks set up on dividend reinvestment plans, or DRIPs. Of course, because I held some of those stocks on their dividend record date, I still received DRIP’d shares for TELUS, Bird Construction, Rogers Sugar, Liquor Stores, and RioCan.
It annoyed me every time I logged into my WebBroker account and saw 1 share in each of those companies just sitting there. I didn’t want to sell them and trigger a $9.99 commission for each one (which would be more than the value of the stock, in the case of Liquor Stores). So on Thursday I finally took the time to call TD Direct Investing and asked if there was anything they could do. I was pleasantly surprised when TD offered to sell each of the individual shares without charging me a commission. Shocking, I know!
Okay, I’m not going to gush over unlocking $100 worth of stock for free but I thought it was a nice gesture from TD 🙂
This week’s recap:
On Monday I compared price gouging on a bag of ice during an emergency to buying a house in Vancouver or Toronto today.
On Wednesday Marie looked at the pros and cons of getting a personal loan. The key takeaway from this post:
“This type of loan will not work for you if you don’t change and control your spending habits.”
On Friday Marie continued her retirement series with a post about using your house for income.
Over on Rewards Cards Canada I listed 12 myths about the Aeroplan program (and some truths).
A new robo-partner
I’m a big fan of the FinTech revolution and in particular what robo-advisors are doing to help investors face the challenges of high fees and bad behaviour. That’s why I’m pleased to announce a new partnership with ModernAdvisor that I hope readers will enjoy and benefit from.
One feature that sets ModernAdvisor apart from other robo’s is its 30-day risk-free trial. ModernAdvisor seeds your trial account with $1,000 of their money. Keep any gains when you open and fund an account at or before the end of the trial. If your trial account doesn’t make any money, you’ll still get another one month free when you open an account.
The online investing platform is slick – I took a test-drive myself:
Boomer & Echo readers will get a $50 bonus when they open and fund a new ModernAdvisor account (we’ll also get a thank-you bonus for referring you).
Weekend reading:
Not a great week for the payday loan industry. First, Google decided to ban all ads from payday lenders, calling the industry deceptive and harmful to consumers. Then the Alberta government clamped down on the amount payday lenders can charge – reducing the maximum from $23 for every $100 loan down to $15 while giving customers 42 days to pay back the loan before interest starts accruing.
Naturally, the payday loan industry took great offence to these changes, saying the legislation goes too far and will limit the availability of short-term credit for people in Alberta. Give me a break.
One woman shares why she left the payday loan business after five years: “We are loan sharks.”
GreedyRates.ca does some of the most in-depth research into credit cards and loyalty programs. Here they’ve put together a ranking of the best cash back credit cards in Canada for 2016. Check it out!
One thing I like about our Amazon Prime membership is the ability to return unwanted items for free. Online retailers have long resisted offering free returns, but now PayPal Canada has announced it will provide up to 10 refunds a year on online return shipping costs (up to $300 annually) in hopes of luring more e-commerce business.
Apple Pay has finally come to Canada and MoneySense answers six questions you probably have about this new payment technology. Who can use it? Is it safe? Does anyone care?
FinTech companies are joining forces with Credit Unions to add legitimacy to the fledgling industry.
JPMorgan Chase CEO Jamie Dimon wants to “protect” you from these innovative FinTech start-ups. Sure.
Rob Carrick with a lesson on how a house can become a prison after it soars in value.
Are you sure you want to own a house? This article argues that home ownership a form of slavery while renting is what you do when life is so interesting you don’t notice where you live.
Will spoiled boomers bankrupt the millennials? Probably not.
A great piece on how the rising loonie is impacting Canadian investors. My response:
“I use the exchange traded fund VXC to get exposure to markets outside of Canada. It’s down this year, even though the underlying ETFs it tracks in the U.S., Europe, and emerging markets are all up or flat. The reason is because of the rising Canadian dollar. The thing is, last year VXC had a nice return as the loonie tanked, so I can’t really complain when it goes the other way.
What’s an investor to do but stand by and accept that you can’t predict currency fluctuations?”
An article that hit home about the dangers of not including spouses in financial planning.
Pet travel costs, breast augmentation, free beer. Tim Cestnick reveals the craziest tax deductions he’s seen for 2015. My favourite – the deduction for paying a kidnapping ransom.
Dan Wesley from Our Big Fat Wallet looks at the pros and cons of moving to another province to save on taxes.
When it comes to holding corporations accountable, we often think of high-profile activist hedge-fund managers like Bill Ackman forcing change. But research shows that index funds are actually improving corporate governance. Look at what Vanguard CEO F. William McNabb III had to say:
“We’re going to hold your stock if we like you. And if we don’t. We’re going to hold your stock when everyone else is piling in. And when everyone else is running for the exits. That is precisely why we care so much about good governance.”
Morgan Housel acknowledges that there are conflicts between what customers need and what good, honest professionals are sometimes able to provide.
“Coming to terms with this might make you less cynical about the people who work in the the finance industry and more enlightened about what needs to change.”
In some situations, donations of goods are specifically requested by aid agencies, or families amidst disaster. But when unsolicited goods are sent, they can do more harm than good.
Finally, a chilling long-read about the Fort McMurray fire: The Great Escape.
Have a great weekend, everyone!
The majority of Canadian seniors consistently report that they prefer to remain in their family home, in their current neighbourhood, and close to family and friends, for as long as possible.
Yet, many also say that financial challenges are the biggest hurdle in doing so.
A mortgage-free home is usually one’s biggest single asset.
Here are three ways to tap into that asset and generate some income from your house.
1. Develop a basement suite
While you are still working you can top up your mortgage or take out a line of credit to construct a basement suite that you can rent out. Initially, the rent will pay back the debt, then the suite will provide supplemental retirement income.
Converting your basement into a rental unit can be a lucrative move if you have the right temperament.
Related: Our shocking basement renovation bill
First, make sure the zoning laws in your location allow secondary suites. Check the regulations and requirements, and get the necessary permits.
You are expected to declare the rent as income and pay tax accordingly. You can also claim a tax deduction for the percentage of the expenses (based on square footage) that the rental suite occupies, e.g. heat, hydro, insurance, mortgage interest.
Be careful with claiming Capital Cost Allowance (CCA) for any long-term renovations such as a new furnace. While it may lead to savings in the short-term, you will have to pay capital gains when you sell your house.
My mother-in-law gave her tenant a reduced rent in exchange for help around the house – shoveling snow, mowing the lawn, and minor repairs, which worked out well for both of them.
2. Get a roommate
When their wives passed away within a year of each other, brothers Ernest and Albert made the decision to live together. Albert sold his house and moved into Ernest’s home which was large enough to provide the privacy they each sometimes required. The arrangement recaptured the closeness the brothers had shared growing up.
“Old Ernie can be a pain in the patoot sometimes, but overall, it’s working out great,” says Albert.
Most of us are familiar with the old sitcom “Golden Girls,” where four women shared a house and became fast friends.
Besides the financial benefits of sharing costs, having a roommate provides companionship and help with household chores and maintenance.
3. Tap into your home equity
There are two ways you can tap into the equity in your home – Reverse Mortgage and Home Equity Line of Credit (HELOC). Both can help house-rich seniors with limited incomes find an extra source of income without being forced to sell their homes.
Reverse mortgages are offered by Home Equity Bank’s Canadian Home Income Plan (CHIP) the sole major provider in Canada.
Related: Does a reverse mortgage make sense for seniors?
You can access up to 50 – 70% of your home’s value depending on your age, equity and some other variables such as location. The loan is secured by your home with no need to make any payments for as long as you or your spouse lives there.
You can take the money as a lump sum, monthly payments, or a line of credit that you can tap into as needed. Access is not restricted by your current income, health or credit score.
Although set-up fees have recently come down, they are still hefty. Interest will accumulate on the amount you borrow which can eat away at your home equity, providing less in your estate to leave to your heirs.
A HELOC is a revolving line of credit secured by your home for an approved limit up to 80% of your equity.
It allows you to access funds quickly and pay as little as the accrued interest on the outstanding balance each month. Any loan principal that is paid is re-advanceable.
You need proof of steady income sufficient to meet your financial obligations.
Although less expensive to set up, HELOCs aren’t without risks. Rising interest rates increase monthly payments. The death of a spouse or changes to bank credit policies can cause the bank to review the credit and reduce the limit, or the loan can even be called in.