Tuesday, 8 December 2015

Why I'm Not Applying for the Tangerine Money-Back Credit Card

When Tangerine bank launched it's new Money-Back Credit Card earlier this fall the blogosphere was abuzz as everyone drooled over how much cashback they would make with a zero-fee credit card!   And it's true, at first glance the concept seems like a no-brainer.... plenty of cashback categories, free additional cards, and no fees.  I even signed up for the sneak preview and got my approval email yesterday.

But I'm not applying for Tangerine's new card.   Instead I will stick with my Scotiabank Momentum Visa Infinite that made its way into my wallet a year and a half ago.  Why?  Because the Scotia Visa gives me more cashback!

The Comparison

Assuming you want a credit card that will maximize your cashback (and I hope you do), you need to consider a few items:

  1. The total value of your annual credit card purchases
  2. How many people will use the account
  3. What types of purchases you charge to your credit card (which stores/merchants/etc.)
  4. How and when you want to receive your cashback
  5. What other benefits are important

Total Purchases and Users (items 1-2)

My wife and I both use the same card (on the same account), and charge a combined dollar value of just over $30,000 per year.  Scotia Momentum Visa Infinite splits that up into 3 categories:
  • Gas/Groceries  (4% cashback)
  • Recurring Payments/Drugstore  (2% cashback)
  • Everything Else  (1% cashback)
By contrast, Tangerine's new Money Back Mastercard has 10 spending categories, and allows you to pick 3 of them for 2% cashback.  Spending in any of the remaining 7 categories yields only 1% cashback:
  • Grocery
  • Eating Places
  • Gas
  • Drugstore
  • Entertainment
  • Furniture
  • Hotel/motel
  • Recurring Payments
  • Home Improvement
  • Public Transportation and Parking

Types of Purchases

The key to this whole process is understanding your spending patterns.  A financial budgeting and analysis tool like Mint.com really helps with this process (although I ended up sorting a lot of the raw data in a spreadsheet).  Our family's top 3 credit card spending categories are Recurring Bills (about 15%), Groceries (11%) and Gas (10%).  Eating Places is a close 4th at around 10%.  So obviously I would select those 3 categories as my 2% cashback options, electing to receive only 1% for remaining categories.   If you're paying attention you may have noticed that all those 3 categories fall in the Scotia Visa 4% or 2% cashback.  So instantly we see that I'm losing 2% in the Groceries and Gas bucket.  

The million-dollar question: is 2% enough to cover the fees associated with Scotia's Visa? Turns out in my case, it is.   I ran all the numbers in all 10 categories and my net cash back (that is, total cashback minus any fees associated with the credit card) was within $3 of each other, in Scotia Visa's favour!

Note Your numbers could be completely different, which is why you must run them and understand your spending habits to make an informed decision.  If your largest spending is in Hotels and Home Improvement, you would likely get better benefit from Tangerine's Mastercard.

The Rest of the Story (items 4-5)

Scotia Momentum Visa Infinite credits your cashback amount to your credit card statement each year in November no matter when you signed up (my Amazon.ca Rewards Visa, on the other hand, automatically provides a statement credit each time your cashback amounts to $20).  Scotia charges me $99 for the first card, and an additional $30 for a secondary card.  My total annual fees are $129, which were factored into the comparison earlier.  These fees are charged to the credit card every January.

I looked on the Tangerine site but didn't see the method or frequency of Tangerine's cashback procedure.  It is important to note that, for this card to make sense, you should deposit your cashback in aTangerine Savings account (if you elect not to do this, the amount of 2% cashback categories allowed drops from 3 to 2).  

Both cards provide some standard Purchase Assurance and Extended Warranty, but Scotia's Visa gives me a number of insurance products, including: Travel Medical Insurance, Trip Interruption Insurance, Flight Delay, Lost Baggage, Travel Accident Insurance, and Collision/Loss Damage Insurance for rental cars!  The Scotia Visa has a high (but standard) foreign currency exchange rate of 2.5%... Tangerine's Mastercard is only 1.5%.  This category isn't important to me as I use the Amazon.ca Rewards Visa for all foreign currency transactions (it doesn't charge any exchange fee!).

The Winner

The winner for me is clearly the Scotia Momentum Visa Infinite card.  It gives me the most net cashback (though only by a little), and it provides the highest cashback return on spending categories I know I will always have: Gas/Groceries, and Recurring Bills.  It also gives me a number of insurance benefits that I use regularly when travelling.  
That said, even though I won't be using Tangerine's Money Back Mastercard, it might be the right fit for you.  If you spend substantially less on a credit card in any given year, or if your spending categories are not mostly Gas, Groceries,and Recurring Bills, the Tangerine Mastercard may be a better overall choice.  Running the numbers is really the only way to tell!

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