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Discussions about the truths and myths surrounding credit cards can sometimes get heated on social media and on the Milesopedia Facebook group.
Mostly to warn against the dangers of over-consumption and debt that threaten their users. Did you know that over 70% of Canadians pay their credit card balances in full each month?
What if the world of credit cards wasn’t just about stories that end badly? What if there were benefits to expanding our financial literacy, while simultaneously debunking the myths associated with the world of credit cards? Let’s go assess our knowledge.
Warning: this story may have a happy ending.
It is true that fraudsters and banking institutions are engaged in a trench war concerning transactions via chip cards, magnetic stripe cards, and online orders. These require our security code and make us particularly vulnerable.
But the advantage of a credit card is that we can regularly track transactions in our online account and notify our bank as soon as we don’t recognize an expense.
And even if we do not usually check our account before the monthly statement is issued, the bank itself could detect the appearance of a fraudulent transaction and contact us.
The financial institution then cancels the card before issuing a new one, and does not charge us for the fraudulent transaction.
In all cases, we are not held responsible for fraud for transactions that are not ours!
Do credit cards have this power over humans? If we are impulsive and irresponsible by nature, it is indeed better to work on these behaviors before applying for credit cards.
Moreover, this extends to all spheres of our lives, not only to our relationship with money. Obtaining credit cards offers us the opportunity to:
This myth is quite popular. D’abord, il faut savoir que le score de crédit s’établit à partir de plusieurs facteurs :
The two factors that are impacted when opening a new credit card are our credit history (i.e. the number of years we have been part of the credit world). When adding a new card, the credit age will be lowered. But this factor only accounts for 15% of our rating and the drop of a few points will quickly be made up for.
The same is true for the “new applications” factor: this only accounts for 10% of the credit score.
A missed payment would have had a much greater impact (35% of the score) or excessive use of the granted credit (30% of the score).
The benefits of having multiple credit cards and being a good payer boil down to this:
That said, Milesopedia recommends not making new credit applications when shopping for a mortgage rate.
First, there are several no-annual-fee credit cards that have good benefits such as insurance and opportunities to optimize certain expenses. Why deprive ourselves of it?
Then there are those with monthly or annual fees. Let’s get out our calculators.
Is it worth paying $120 a year to get 5% back on our groceries?
For example, if I spend $100/week on food, which is low in 2021, that is still a return of $260 annually, not to mention the other benefits provided by credit cards such as the American Express Cobalt® Card, the BMO CashBack® World Elite®* Mastercard®* or the Scotiabank Gold American Express® Card.
Is it wise to renew the Marriott Bonvoy® American Express® Card every year for $120 (or the Marriott Bonvoy® Business American Express® Card for $150) to benefit from its annual free night certificate worth 35,000 points (when we can use it at hotels worth $300 or more)?
Does paying $139/year with cards like the CIBC Aventura® Visa Infinite* Card, the CIBC Aventura® Gold Visa* Card, or the Scotiabank Passport Visa Infinite* Card compensate for the four to six complimentary airport lounge visits that I use, each costing $45?
Is $139 worth the price of the free ticket I get for a round-trip flight to Hawaii (especially when the first year is free, as with the TD® Aeroplan® Visa Infinite* Card)?
Is $150 expensive for a credit card like the National Bank World Elite Mastercard which offers you up to $250 in reimbursed travel expenses per year, the best insurance on the market (up to 60 days for your trips and up to 3 years of extended warranty), unlimited access to the National Bank lounge in Montreal for you, an additional traveler, and up to 2 children, and up to 2 points per dollar including at Costco?
Or the $149 requested by a credit card like the HSBC World Elite® Mastercard® which offers a $100 travel credit each year and charges no conversion fees for your foreign currency transactions (a 2.5% saving on every purchase)!
Anyway, I’ll leave you to think about it. Start from your needs and compare offers with the milesopedia comparison tool.
Different needs, different solutions. Cashback is highly appreciated by people who want to save on their expenses.
For example, in these times of home renovations, it is particularly interesting to be able to reinvest this cashback into new purchases.
This is why we see many of our members taking advantage of current welcome offers from several credit cards offering 10% cashback in the first few months.
However, many people prefer cards that will allow them to earn travel rewards to save on:
Let’s take time to define our needs, our projects, and our dreams with a strategy. Let’s match it with the best rewards program and associated credit cards to help us achieve it.
And let’s stick to credible readings to debunk the myths.
I’ll give you that. An American Express card is less accepted than Visa and Mastercard. But times are changing, and it is increasingly accepted in Quebec and elsewhere in Canada.
For example, IGA grocery stores in several regions in Quebec have been accepting it since April 2021.
American Express cards are so advantageous, whether for the welcome bonus or offers throughout the year, that we do not want to do without them.
Moreover, few members of the Milesopedia community do not yet have the American Express Cobalt® Card, which offers 5 times the points for everyday expenses such as groceries, dining, or convenience stores (think gift cards 😉 ).
Another example: the Marriott Bonvoy® American Express® Card offers a free hotel night every year upon card renewal.
The offers also include discounts and credits with our phone service providers or in department stores like Wayfair.
Who does not want a $20 credit on a $100 purchase?
I never thought I would advocate for infidelity, but in this case, yes, it is necessary. That is, if you are serious about growing your assets. Banking institutions want our business and compete with each other to attract us. Let’s take advantage of it according to our needs.
For example, I became a client of a bank that offered a credit card with no conversion fees when I travel abroad: the HSBC World Elite® Mastercard®.
My bank simply did not offer this type of product. Many people also do not know how to pay a credit card bill when their bank account is with another institution. It is very simple: under your bank’s “Pay your bills” tab, you just need to enter the credit card name and number, as you would for Hydro-Québec, indicate the amount, and click Pay. That’s it.
To summarize the pros and cons of credit cards…
Benefits:
Cons:
So, what about those myths? If you pay off your credit card balance every month, refusing to pay any interest, you are a good candidate to own more than one card. They offer rewards, insurance, and promotions that you don’t want to miss.
Did you know that in 2020, I flew to South Africa in business class for less than $200, and paid for the rest with credit card points? See how well the story ends…
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