I have a weird history with credit cards.
I remember in university, being soooo offended that I couldn’t get approved for a student credit card in my first year of university. I mean yes, to be fair, I had no steady income, so I probably shouldn’t have had one in the first place, but you hear all of these rumours that anyone with a pulse can get a credit card in university.
Myth, busted: it turns out people really do get turned down for student credit cards, and I was one of them. Maybe they just didn’t like the looks of me.
In any case, after that crushing (not very crushing) defeat, I pretty much wiped my hands of credit cards for five years.
I relied entirely on debit for all of my student purchases, thanks in large part to a free, unlimited-transactions student chequing account with a Big Bank. When I graduated and got my first monthly statement, including the $50 in transaction fees, I knew it was Time.
Credit Card Time.
I’m not kidding when I say that transaction fees were the single driver of why I finally got a credit card. If I had been smarter and made the switch to Tangerine earlier, I might still be a person with no credit history.
(I guess if nothing else, bank fees are indirectly the reason someone will approve me for a mortgage one day, which is nice. Kind of.)
Anyways, in the absence of making the Big Mistakes with credit cards – carrying a balance, maxing them out, etc – I still managed to make some decent ones along the way.
Let’s discuss, because if I’ve learned anything from my How-Not-To-Make-My-Mistakes posts, it’s that my god you should all use me as a cautionary tale.
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How Not To Choose a Credit Card
If there’s one piece of advice that I would give to literally anyone about literally any financial decision, it’s this:
Do.
Your.
Own.
Research.
Hell, if I was going to rename the blog, it would be to that. DoYourOwnResearch.ca.
So when it came time to finally add a credit card to my life, you would assume that I would have done some research about which card to get, right? About the different types of rewards and programs and fees and interest rates?
Ahahahahahaha yeah no I didn’t do that.
What I did do was go straight to the bank and ask for the credit card I had seen advertised at the movie theatre.
I wish I was joking right now.
They approved me, gave me a credit limit, and I was the owner of a shiny new rewards card. I lucked into the fact that it was a no-fee card, and that the interest rate never mattered because I never carried a balance, but come on, Past Des. You just got lucky.
How Not to Choose a Rewards Program
So, that rewards program. You would hope that I at least chose a program that would give me good perks that I valued, right?
Well, it kind of did – in the end.
The rewards were mainly free movie tickets (yes, everyone in Canada now knows which credit card I had) and as I built up more and more points without using them, I started to get some interesting emails from the credit card company.
Desirae, you can go see a movie!
Desirae, you have 17 free movies available!
Desirae, my god, make a friend and go to the freaking movies already.
Desirae, now we’re just sad for you.
Desirae, have you died?
Desirae, WHY DO YOU HATE MOVIES.
It turns out that if you don’t have a car, are single, and live within walking distance of approximately no theatres that participate in the program, you don’t go to see many movies.
Who knew?
(This story has an eventual happy ending, in that when I met The Boyfriend, I had a grand total of 27 free movies saved up. Thanks to this program, and my new suburban lifestyle near multiple movie theatres, we haven’t paid for a movie in almost three years, and we’re not even out of points yet.)
How Not To Choose a Credit Limit
Since this was my first credit card, I knew that I had to be hyper-vigilant about using it properly.
Every time the bank would call me to offer to increase my credit limit, I steadfastly (and let’s be honest, self-righteously) turned down their offers of a higher credit limit.
Why? Because I (fully mistakenly) thought that having a higher credit limit was a bad thing. I figured it was the first step on the slippery slope towards mountains of credit card debt.
I know.
To think that – after a year and a bit of successfully managing a credit card and paying it off in full every month – accepting a higher credit limit is the one thing that will trigger my descent into financial ruin is a pretty misguided thing to think. It’s also patently untrue.
But based on that, and that alone, I kept declining the increased credit limits I was being offered.
Until. (Of course there’s an “until.” This would be a boring story otherwise.)
I had just declined a credit limit increase from $2000CAD to $5000CAD, and thought I was sooooo wise. Then I boarded a plane to a big work trade show in Las Vegas, and found out upon arrival that our company policy is to charge our hotel to our personal cards, and expense it when we get home.
Let me tell you about how credible you sound, calling your credit card company and explaining to them that you’re in Vegas and you need to accept that credit card limit increase they offered you last week.
It’s not very credible.
They were (shockingly) happy to give me the increase, and my work trip went off without a hitch. Turns out, the increased credit limit didn’t turn me into a financial mess, and I kept on living my life and paying off my card every month.
Who knew.
How Not To Choose Cash-Back Categories
After all of those lessons, I finally felt like I had found my footing with this whole credit card business, so I started branching out. This was around the time that I started to take my money more seriously, and I did some research into the different cards that I might want to add to my wallet.
I took advantage of two different travel rewards cards and their sign-up bonus miles, which together covered a big chunk of my travel expenses for two destination weddings this summer – yay!
By the end of 2015, that was where I stood – three credit cards, two of them with travel rewards, one of them with movie rewards.
And then I heard about the Tangerine credit card.
I’m not going to lie, I’m a bit of a Tangerine superfan, so of course I signed up for the preview as soon as I could possibly access it on their website. It took about a month, but I was added to the preview and had the opportunity to choose my three cash-back categories, which would get me 2% cashback (and 1% on everything else.)
Now it’s important to remember at this point that I had two other credit cards (the third was cancelled in preparation for getting the new Tangerine one, haha.) When I went to choose my cash back categories, I did do one thing right: I compared how the rewards on my other cards would supplement the cash-back on my Tangerine card.
But you know what I didn’t really factor into things?
How much I missed having most of my financial life in one place.
Over the past year, I went from having all of my chequing, saving and credit cards with a single bank, to chequing with Tangerine, investing with Wealthsimple, an Amex credit card (for the travel points) and recently, some savings accounts with EQ Bank.
When I took my other credit cards into account in choosing my Tangerine cash back categories, I hugely underestimated how much I’d like having my chequing and my credit card in the same place. I also way overestimated my willingness to use my other credit cards for just about anything beyond business travel, once I had this system all together in one place.
So let’s be real: I didn’t choose the most optimal categories. But, in contrast with my previous “Oh my god Desirae how did you even let that happen” credit card decisions, this one didn’t turn out so badly – especially since if I really wanted to, Tangerine would let me adjust my categories.
So friends, spill – have you ever made any mistakes in your credit card journey, beyond what people usually consider as “big credit card mistakes”? Did you manage to dodge all of these by being super-informed and responsible? (Am I the ONLY ONE who didn’t get approved for a student credit card? This is a genuine concern of mine, haha.)
Oh how I WISH I had been turned down for a credit card in college! I literally got confronted with the clipboard and a promise of a free t-shirt the FIRST WEEK after I left home, and I totally fell for it… yes, a stupid free t-shirt was all it took back then. It wasn’t even a nice shirt! But then I had a credit history, and more card offers came in. I think I had four cards before graduation, and while the debt total at the time now seems manageable, at the time it felt completely stifling. Sometimes rejection is a blessing. 🙂 Credit scores are such crazy things, because you get a better score for using more credit, even though that is bad. So basically the score tells banks “Who’s the biggest sucker who will actually pay this back?”
Hahaha I totally get that – the first time I checked mine I was pretty surprised that I didn’t have like, the perfect score, because I’ve always paid off my credit card on time. Turns out, if I had more types of debt, like a car loan, my score would be higher! And a whole whack of other confusing factors. My big takeaway from learning about it was to do what I can, where I can, to increase my score, but that at the end of the day if the biggest ding to my score is that I don’t have enough types of debt, I think I’ll be ok.
And see?! Everyone knows that all you need to do in school to get a credit card is want a free t-shirt! Sigh. You’re totally right though, that it was a blessing in disguise, because I distinctly remember checking my debit balance while shopping (I was a spendy student) and being like yeah, maybe I shouldn’t buy that. I feel like a credit card may have discouraged that kind of you-only-have-X-amount-of-money behaviour!
Omg, Des, my whole entire blog is basically just one cautionary tale after another. If you rename your blog doyourownresearch.ca, I am renaming my blog aseriesofcautionarytales.com. (Also, why does the U.S. get stuck with dot-com instead of a cool country-specific suffix?)
Also, can we just talk about how weird it is that companies expect you to have enough money/a high enough credit limit to pay for random large work expenses and then wait an unclear amount of time for them to reimburse you? i have just wandered into this territory this week, when I learned that if I pay for a public transportation pass and a conference registration fee on March 1st I don’t get reimbursed for either of them until April 30th. Which is definitely more than one credit card billing cycle away, and definitely creates a ton of confusion about how much money I actually have (luckily the answer in this case is: “more than I think I do!”). Do you have a good system for keeping track of this across months? Because if so I would like to steal it please.
Oooooooh boy this was the biggest challenge for me – the work expenses thing! ESPECIALLY before I was tracking my spending, it was like a black box of “I think I spent X on the trip, and Y before that, so I have…. wait, how much left to spend?” It also did not help that for a long time my big measure of financial success was “Can I pay off my credit card this month y/n,” haha.
The one thing I’ve found super, super helpful has actually been using a separate credit card for work purchases and travel expenses. It seems like a ton of extra work, but it’s been huge in terms of keeping my work expenses and my personal expenses separate. Example: that time I went to Vegas for work, I ended up buying my boyfriend a gift at the Lego Store and all I had to do to keep track of that as a personal expense was put it on a different card.
I was actually a little worried about the pay periods vs. credit card billing cycles thing that you mentioned, where I was going to incur interest charges on work expenses, but I double-checked with our finance team and they said that if that happened, to expense the interest as well. That might not be a standard policy everywhere, but if it isn’t, I would fight for it – you’re doing them a favour by carrying the expense and they should cover what that (might) cost you. That goes for “separate work card” and “not separate work card” equally, but it’s also a much easier way to distinguish and defend that yes, all that interest was only for work expenses.
PLUS if you tend to spend a lot in the same categories for work you can get a card that gives you more points for those things. I use a travel rewards Amex for my work travel, because no one says “No we don’t take Amex” in Vegas, haha, and I get double points for spending on hotels and restaurants. AKA my life on business trips!
I hope this helps – multiple cards totally isn’t the only solution, but it has SUPER worked for me!
Thanks for the tips! I may not have enough work expenses yet to get a separate card, but I will definitely keep that in mind for the future! 🙂
Movies as points! Lol! Dyin’here!
I think my biggest mistake with cc’s is card hopping to get 0 PCT, not calculating that 3% of $10,000 was $300. Hopping and not getting rid of.
I’m going to repost you!
Hahaha soooo many free movies! And thank you!
“To think that – after a year and a bit of successfully managing a credit card and paying it off in full every month – accepting a higher credit limit is the one thing that will trigger my descent into financial ruin is a pretty misguided thing to think. It’s also patently untrue.”
Yup. Me. 100%. Although I still can’t increase past $5000… Great post!
Oh thank god I’m not alone on that – it seems silly in retrospect, but I was SO convinced that accepting a higher limit = financial ruin. I’m really glad I’m not the only one (and as if that was one of the messages I took away from the patchwork “how to use credit cards” advice I picked up over the years eh? If only I had been reading blogs earlier – although with credit it really an be so situation-specific!)
And thank you!
Your tip about refusing credit card limits was an especially important one for us to consider. We didn’t know we could refuse the increases until they consumed a very large portion of our potential debt:income ratio. We’ve had our limits reduced since then, but it’s something that I think others might not be aware of, too!
Thanks Claudia – and that’s totally true, my relative ignorance about the “pitfalls” of accepting them could easily go the other way and people seriously might not know they’re optional! I’ve been lucky that I’ve never gotten close to running up the balance within striking distance of my limit (except for that one time in Vegas, lol) but it’s not at all outside the realm of possibility. Thank you for sharing that!
You are NOT the only one who was denied for a student credit card! I was also denied because I had no income. I had to wait until my co-op work term so I could show some real income, and then I got one with a $500 limit.
I’ve also made some mistakes with credit cards in the past. I hung on to my no-fee low-interest rate no rewards credit card for way too long. I’m sad to think about all of the rewards I missed out on. But now I’ve got a rewards card with a nice fat credit limit (that they keep trying to increase) that I can use for a ton of work expenses without having to worry! Woot!
AMAZING! Ok I feel a lot better, lol, and I’m not even joking. Maybe it’s a Canadian thing, that it’s a bit harder to get our student credit cards? I remember Scotiabank offering me a secured card as a backup option but no dice on any kind of credit as a 20-hours-a-semester TA, lol.
And I’m in the same boat with my current cards – huge limits (I actually laughed out loud at what Tangerine gave me, but then shrugged and figured it was good for my credit utilization rate if nothing else) and no worries when I’m travelling for a trade show, Vegas or otherwise!
I found myself in $50,000 dollars worth of credit card debt by the time I was 23 years old. If I had my way, I would ban those darn things from existence! Yes, young people need them to build credit, but I believe the banks should give out no more than a thousand dollars on a card. If the cardholder doesn’t pay, then they are cutoff. I realize they do this on a higher level, but we really do need to protect young people from getting into debt. Okay…back to the real world!
I think that’s a brilliant system Madison, and thank you for sharing your experience – I think it’s absolutely criminal that the banks will just keep giving people card after card after card! Especially at the student level, I think a one-card, misuse-it-and-lose-it policy would go a long way to showing people the real limits of credit cards, and what it takes to pay them back.