There has been a lot of discussion about the negative changes that are coming to the Tangerine Money-Back Credit Card that come into effect on April 29, 2017. Even though it is the Tangerine card that triggered this post, I will focus more on what to generally do during a credit card devaluation.
Let’s use the Tangerine card as an example to illustrate my suggestion. But first off, let’s recap the significant upcoming changes to the card:
- No annual fee
- Earn 2% cash back on a select group of categories (choice of 2 categories, a 3rd choice if you deposit the cash back into your Tangerine Savings Account)
- Earn 1% cash back on all other purchases (decreases to 0.5%)
- 1.5% foreign conversion/transaction fee (increases to 2.5%)
- Balance transfer fee of 1% or minimum of $5 (increases to 3% or minimum of $5)
- Over-limit fee $20 (increases to $25)
- Cash advance fee of $2.50 within Canada (increases to $3.50)
That is a fairly big hit across the board. Not to mention that we have not seen the 4% cash back sign up bonus in a while.
I would prefer not to dedicate a post to bashing Tangerine, as I was a big fan of them when they first introduced this credit card. I really saw this as a stepping stone to building towards something more and taking over more of the market share. Anyway, I am going to provide some of my recommendations on what to do about a devaluation.
Can Still Use it for Specific Purchases
Using the Tangerine card as the example, you can still use the card on the select group of categories that earn you 2% cash back. That is still a decent return. What you will want to do is find another credit card to supplement your other purchases, because you can do better than 0.5%.
Basically, even though there is a devaluation, you can always continue with the credit card on specific purchases that are still giving you good value. If not, then move on.
Give your Business to Someone Else
There is always the fear about hurting your credit score. If you study how the credit system works, then you will know that signing up for a new credit card can have a negative impact in the short term, but can help you in the long term if you follow the rules correctly. Be very careful, there will be people in the financial industry that tell you that it will hurt your credit score if you cancel your card, because they do not want to lose your business. Knowledge is power, I suggest to study the credit scoring system. If you are not interested in studying it, then it may be simpler to keep the credit card and not worry about optimizing your rewards. To be fair, it does take a little studying to maximize your return, I do not want to promise you otherwise.
The main point that I do want to emphasise about giving your business to someone else is to not be afraid. Banks are very good a telling people to consolidate everything into one place, so that it makes it easier to keep track of everything. Again, if you are not willing to diversify your portfolio, it will be fairly difficult to optimize your rewards.
Timing the Cancellation
Depending on your situation and depending on the credit card, you can also handle it accordingly. Let’s use the Tangerine card as the example again. If you know that you are planning to apply for a mortgage soon, you can always keep the Tangerine card (since there is no annual fee anyway) until you qualify for your mortgage before cancelling it.
If the card has an annual fee, you would want to have a strategy before applying for it. For instance, if there is a first year fee waived promotion, and you know that you do not want to keep the card beyond the first year, you will want to plan when you will cancel before applying for it.
For sure there is more that I can write; however, I will stop here. I feel that I was fairly harsh in today’s post already. The bottom line is, if you want to maximize your rewards (miles, points and cash back) portfolio, you need to be willing to leave a company at any time and be willing to constantly diversify your portfolio. If you want things simple, then you always have the option of consolidating all your business with one company. In which case, I would strongly suggest that you demand more out of that one company.
What are your thoughts about my recommendations and what other suggestions do you have when you see a credit card devaluation? Please share with us in the comment section below!