As we’ve been doing the Total Money Makeover one of the things we have been unable to find a suitable replacement for is a credit card.

Statistically you spend 12 – 18% more when you use a credit card. Those numbers hold whether you’re in the US or Canada, and I’d bet that they are pretty solid for most developed nations. 80% of ‘points’ earned on credit cards are never redeemed.

Further they don’t offer points because it’s a good deal for you. Banks and credit card companies are a business, they offer points because they make more money than it costs them. So you spend more when you get points than it costs them to fill the ‘rewards’.

Simple Math on my Airmiles

A round trip flight to Ontario (where my family is) is around 2000 air miles. We earn 1 air mile for every 25 dollars spent.

2000 * 25 = 50,000

Assuming that I ‘over spent’ on the low end at 12%.

12% of 50,000 = 6000

So I would have 6000 in my bank account not in Visa’s account. That 6,000 means 2 round trip flights for all of my family (2 adults 1 kid and the dog).

That is not a deal that works in my favour

Recommended Alternatives

If you’re a US reader you can get a Visa Debit card. It offers the same consumer protection as a Credit Card, but is tied to your bank account. So you only can spend money you have.

Unfortunately in Canada we do have them, but they are rarely accepted. I know that my bank (Royal Bank) offers one that is for online purchases only, but only if it’s accepted. I’m also told that TD Bank offers exactly what we’re looking for, so if you’re a TD customer pay off your Credit Card and switch to a Visa Debit.

According to the Visa Website CIBC also offers one. Now I used to do some banking with CIBC and they flagged me as having bad credit for 5 years. Turned out they owed my $120 (I had over paid my card) and just had never followed up with the credit report places. After 3 days of run around at my local branches, I tweeted and they called me to finally get it fixed. In short, I doubt I’ll ever do business with CIBC after such terrible customer service. If you are already banking with them, and like the service, stop using your credit card and use the Visa Debit card they offer.

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A final alternative in Canada is Mogo. Mogo is a prepaid credit card, no overdraft. So you put cash on it and then can spend that cash. One ‘pitfall’ is that you can apply for a short-term small loan with Mogo. There are 2 options:

  1. $200 – Mini Money
  2. Up to $1500 – Zip Advance

Fees are way cheaper than Payday lenders or other Credit Card fees, but still you can go in to debt if you apply for the loan. The key here is that you have to take the step to actually apply for the loan, so if you have the will power to not apply it can be a great option.

Another thing going for Mogo is that there are no monthly fees. All the other prepaid Credit Cards I’ve looked at have a monthly fee of up to $25. So no you’re not paying ‘interest’ but they’re really just calling it a fee and you are paying interest. May fool many, but not me.

The Real Point

So the real point here is to try and make a few more people aware that Credit Cards are a terrible idea. I have already ordered my Mogo card.

Don’t use a credit card.
Points are not something that is a good deal for you.