5 questions to ask yourself before applying for another rewards card


Rewards cards are popular with Canadians, and why not: to be able to earn cash back or points toward a vacation just by doing your regular shopping is a great deal.

Plenty of Canadians already own a rewards card. According to statistics published by Canada.CreditCards.com, 78 per cent of Canadian adult cardholders carried at least one rewards card in 2016. However, many people carry more than one type of card. Since the major banks offered a combined 66 rewards cards, it's easy to choose two (or more) types of rewards that will benefit you most.

But before you apply for another rewards card, consider whether you should apply, and, if so, what other rewards will suit you best.

Jayce Loh, self-professed Points Nerd, suggests asking yourself the following questions before applying for another card:

Can you handle another card?
Keep in mind that when you have multiple cards, it can get harder to keep track of payment due dates. You don't want to lower your credit score by making late payments.

In addition, if you're applying for another card to collect the points, you'll want to make sure you're maximizing the points you earn.

"There are lots of ways to accelerate your accumulation of points if you know what you're doing," says Loh. "Knowing the programs certainly helps."

As you add more cards, it becomes more difficult to understand how the programs work and how you can collect and redeem points to your advantage.

Finally, having more available credit leaves you open to spend more, and potentially not be able to pay off your credit card bills. Your credit score shouldn't sink as long as you pay minimums, however, Loh says, "If you carry a balance, the rewards will never be worth it."

Will you be making a major purchase in the future?
Your credit score will drop four to eight points when you apply for a new card, Loh says, and it takes about three months for it to recover.

But that's only part of the equation. "Payment history and debt ratio make up a bigger part of your credit score," he says. This is why it's so important that you have a good handle on your payments.

That said, Loh recommends waiting to apply for another credit card if you have an important major purchase, such as a house or car, coming up.

"If you don't, leverage your credit history to your advantage," he says.

What will you do with your points?
"Sometimes, these programs devalue points with not a lot of notice," says Loh. "That can put a damper on your redemption."

You don't want to bank a bunch of points with no idea what you'll do with them.

"Start with the end in mind," says Loh. "What will you do with those points? Where do you want to go? What class do you want to travel in? Then consider which program would allow you to get there with the least amount of points."

In other words, work backward to choose the card you need. Compare the reward card programs to see the limitations of each, including destinations and class, to determine the best fit.

"Make a plan, and stick to the plan," says Loh.

Can you meet the minimum spend for a sign-up bonus?
A key reason travel hackers apply for new reward credit cards is to take advantage of lucrative sign-up bonuses. To get the bonus, though, you have to spend a minimum amount, usually a few thousand dollars in the first few months.

To discourage "churning," Loh says, "A lot of cards have increased the minimum spend for bonus points."

The minimum spend starts on approval - not activation, says Loh. This is a good time to consider your spending habits - not just how much you spend, but where, he says. Make sure the card you're applying for will be accepted where you spend the most.

Is the annual fee worth it?
Whether there is an annual fee or not, Loh says, "One of the things you want to keep in mind is the cents per mile. How much are you spending to get those points?"

To determine if an annual fee is worth it, calculate how much you're paying for those bonus points:

Annual Fee                                       

   X      100      =      cents per point

Bonus Points

For example, if you pay an annual fee of $120 and earn 25,000 bonus points, your cost would be about half a cent per point.

Then, calculate the redemption value. How much will those 25,000 points save you when you redeem them for travel? Loh's guesstimate is $1,000. So the calculation would be as follows:

$1,000 Value                                     

   X      100      =      4 cents

25,000 Points

In other words, Loh says, you're paying half a cent to earn a point, but each point is worth 4 cents when you redeem them. This annual fee is definitely a good value.

But again, says Loh, points can devalue over time. His advice to protect yourself against this as much as possible is, "Keep it to two or three cards, and have them funnelling into the same program. I would caution against having cards with different programs. You can't combine your points."

Once you've answered these questions, you're ready to apply for a second (or third) rewards card - or possibly hold off until you get some debt under control.

See related: What to look for in a credit card offer, How to choose the best travel rewards card for you, Pros and cons of co-branded credit cards
Published May 5, 2017

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