How your credit needs should evolve as your family does

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Some Canadians have the same credit card their whole lives. But if you ask the experts, that's not the best idea, especially if you want to maximize the benefits of having credit in the first place.

Instead, your credit card should evolve as your family grows and changes.

"I do think credit cards and their rewards should be assessed as a family dynamic changes," says Kelley Keehn, author of A Canadian's Guide to Money-Smart Living in association with Chartered Professional Accountants Canada. "Of course, it goes without saying this advice is only for those that are responsible users of credit cards and that pay them off every month. If you do, and you put as many of your purchases on as possible, this can add up to big rewards - dollars or points."

But how should your credit card change - and at what point should you make that change?

Single: establish a credit history
"When you're younger and you're maybe in the relationship stage, but you haven't really started a family yet, it's more about getting your credit history established," says Stephen Weyman, founder of HowtoSaveMoney.ca. "Then, when the time comes for you to have a family, get a mortgage, car loans an things like that, you'll have a firm credit history established."

He recommends avoiding the top-tier premium rewards cards at this stage and selecting something a little simpler, such as a no-fee cash back card or, if you're still a student, a student card.

With cash back, you'll,  at least be rewarded for you purchases in the form of a partial credit on the card or cash that can be reinvested into a savings account, which can come in handy later in life.

Long-term relationship: learn to pay your bills together
Once you're in a long-term relationship and living together, it's time to decide how you're going to pay the bills as a couple.

"A lot of couples have a joint credit card that they use to pay all their joint expenses, and then an individual credit card that they put their personal expenses on," says Weyman. "They pay their joint expenses out of a joint account and the personal credit card out of their own personal account, so that's a good way to start."

He and Keehn both advise choosing cash back at this point, still, as it is the most versatile reward. You can save the money for travel, a new appliance or even pay down your bills - whatever fits your lifestyle at the time. It's all about examining your buying patterns and working within them.

"Also, some grocery chains, gas stations and more have cards with greater incentives," says Keehn. "Look at your buying patterns - personally and for business if you're self-employed - and the added bonuses retailers may have for their cards and figure out the balance for you."

Married with children: go from cash back to travel rewards
Once your credit is established and you've gotten the hang of your cash back card, Weyman says it's a good time to look into travel rewards cards.

Shop around and compare cards, Weyman says. By now, he says, you should be able to pick a premium card because your credit history should be strong enough and your income high enough.

This is also a great time to switch to travel rewards because it is the time of honeymoons and family vacations. You and your spouse can amass points towards flights and vacations faster together, which can really benefit you and your family.

"In that stage of your life, if you're interested in travel, travel rewards are the way to go because you tend to get higher value for your spending out of there and your income is high enough to support the annual fees, so you'll definitely make back your annual fee in rewards and then some," says Weyman.

Whenever you're considering rewards, the annual fee is a big deciding factor. You must balance the amount you will be paying with how often you actually use the rewards, Keehn says.

"You really need to examine the credit card's bells and whistles in relation to the annual fee," she says. "Are you getting your money's worth?"

Of course, it's hard to travel with a baby and young kids, and you may find yourself with a pile of points your unable to use. If this is the case, Weyman advises switching back to your old cash back card or upgrading to a more premium form of cash back.

"The premium cash back cards will easily double or triple your reward value over a no-fee, lower-end cash back card," he says.

Then, when the kids are older, go back to (or begin using) a travel rewards card.

Empty nesters: stop and enjoy your highest earning years
You might be downsizing your home at this stage, but that doesn't mean you should downsize the quality of your credit card. In fact, you don't need to change it at all.

"When you're an empty nester, those are still some of the highest earning years of your life and you're going to be doing a lot of spending to help your kids through school," says Weyman. "I don't think there's much need for a big change in that part of your life."

Plus, he says, by that point you know your favourite style of rewards and you're likely locked into your favourite card.

This is also a great period to travel if you haven't had a chance in your younger years. If you switched back to cash back when you had a child, Weyman says this is when you want to switch back to travel rewards.

Then, when you hit retirement and you're on a fixed income, it might be a good time to find a card with no annual fee that focuses less on rewards and helps you focus more on your bottom line.

The No. 1 advice when it comes to choosing a card is to choose the one that best fits you. That doesn't change after you've applied for one or two cards as a young adult. Change your card as you change your life, keep using it wisely, and it can be a huge boon to you through each stage of adulthood.

See related: Money, credit and debt lessons for kids of all ages, Points redemption 101, How to become a points chaser
Published September 14, 2017

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