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On the Money

DAVID TRAHAIR Working Through the Maze L

ET’S START WITH THE OBVIOUS. Anyone who can’t afford to pay off his or her credit card balance every month should not be thinking about credit card rewards programs.

That’s because any benefit that may be received can’t come close to the 20% interest or more that credit card revolvers are likely to pay on their rewards card balance. These people should use a basic low-interest card with few or no benefits. But if you don’t carry a balance, there are hundreds of rewards

to choose from, including cash back; miles/points redeemable for travel/vacation, groceries, gas, general merchandise, gift cards, vehicle lease/purchase/rental and charitable donations; travel insurance, including accident, medical, trip cancellation/ interruption, flight delay, rental vehicle or lost baggage; and ben- efits, such as cellphone insurance, purchase protection, extended warranty, price protection and roadside assistance. So which is right for you? It depends on your specifics. If you

travel a lot, then travel rewards are important. If you don’t, then a simple cash-back card is probably best for you. It’s also smart to change your cards when your circumstances

change. For example, you may travel a lot during your working years but not so much during retirement. Switching to a cash- back card when you leave the rat race might make sense. To help in your quest for the most beneficial card, there are

several great independent websites at your disposal. One of the best is the Financial Consumer Agency of Canada’s

site ( Choose your language, then under “tools and calculators” select “credit card tools,” where you’ll find the “credit card selector tool.” You can narrow your search by choosing your province or ter-

ritory, then the type of card you prefer (general use, secured, student, US dollar or charge), the annual interest rate range on any balance, the maximum fee, if any, you are willing to pay and the type of rewards you want. For example, I selected a general-use card in Alberta with an

interest rate up to 25%, an annual fee up to $150, with miles/ points redeemable for travel/vacation as well as travel cancella- tion and interruption insurance. The tool found 27 options, including pertinent details for each card in a columnar format. Select the ones that interest you and click “compare.” That will give you a detailed comparison to help you make a choice. Another excellent tool is the You select a type of card (consumer, business or student), then a reward type (cash back, retail rewards or travel) and then confirm whether you carry a balance or think you


might in the future. It will ask about your spending habits. That is key because when you drill down to the details of how miles/ points are accumulated on cards, it depends on what you buy. The tool will ask what you spend monthly on gas, groceries, pharmacy purchases, travel, car rentals, recurring bills, restau- rants, entertainment, the retailer you spend the most at and how much you spend, as well as any spending outside of Canada. Those who track their spending are in a much better position

than those who don’t — without accurate spending data you’ll be forced to guess, which can lead to inaccurate results. I just entered an example for a consumer card with travel

rewards and no balance for $6,000 average monthly spending with $200 on gas, $700 on groceries, $400 at the pharmacy, $600

Before you make a switch check the current details of the cards you’re considering

on travel, $50 on recurring bills, $400 at restaurants, $50 on entertainment and no spending outside of Canada. Here are the top three results, with the estimated annual

rewards aſter fees, the annual fee and the interest rate: • American Express Gold Rewards (base fare converted to Aeroplan), $1,415.49, $150, 0%; • American Express AeroplanPlus Platinum, $1,392.23, $499, 0%; and • MBNA Rewards World Elite MasterCard, $1,388.80, $89, 19.99%. It’s important to note the details beyond the rewards and

costs. In the above example, the American Express cards are charge cards requiring you to pay off the balance in full each month, while the MBNA MasterCard lets you carry a balance. The site says the American Express cards include trip cancella- tion and trip medical insurance; the MBNA MasterCard does not. And of course, you need to take into account whether the merchants you frequent accept American Express cards because they aren’t as widely accepted as Visa or MasterCard. And before you make a switch check the current details of the cards you are considering as rules change on a daily basis.

David Trahair, CPA, CA, is a personal finance author and speaker (

Photo: Jaime Hogge

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