Using a credit card is a frugal tip?  Sounds counter intuitive doesn’t it?  In my opinion, using a credit card is the ultimate frugal tool.

Let me explain.  As some of you may know, I funnel most (if not all) of our purchases through a single credit card.  What about the high interest you ask?  We don’t pay any because we pay off the balance in full every month.  Of course this strategy doesn’t work if self discipline isn’t already in place.  That is, the balance must be paid off in full every month or else a cash strategy would be the better financial tool for spending.

Why is using a credit card better than cash?

  1. Tracking – You can track every purchase online or via your paper statement.  This is basically a variation of my write it down frugal strategy.
  2. Insurance – Most popular credit cards (see below) offer warranty extension and protection against theft.  Some even include car rental and lost baggage insurance.
  3. Fraud protection – Most credit cards will limit your liability in the case of fraud.  What happens if your cash is stolen?  What are the chances that you’ll get the money back?
  4. The Rewards – There are a lot of free rewards based credit cards out there, why not get something back for the spending that you do anyways?  Personally, I funnel most of my spending through the SPG hotel credit card, but will use my new 1% Cash Back PremierRewards card if I surpass $30k in spending.

My favorite FREE credit cards in Canada:

Why not a debit card?

I notice that debit card use is very popular in Canada.  Yes, it’s great as it can limit your spending to the amount that’s available in your account and provides electronic tracking of your purchases.  However, there are pitfalls such as if someone sees your pin and somehow gets access to your account, guess who’s on the hook?  In addition to very limited fraud protection, there are no rewards benefits to using a debit card.

Final Thoughts

Credit cards are a great financial tool IF used properly.  I funnel all my spending through a single credit card for budget tracking with the side benefit of rewards and insurance.

What are your thoughts on this?  Do you use the same strategy?

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Although I hate credit card companies, I do exactly the same thing. I use my CC for almost everything I buy.

As soon as I get home I go online and transfer the money from savings acct. to the credit card. The self-discipline part is really what makes it work. Think of it as a part-time job (paid for with cash-back’s and redeemable points).

you transfer money after every purchase?

that seems like too much work… i just keep track of what i’ve spent in the financial software i use and pay it once a month.

we also use our credit card for everything. we signed up for an aerogold visa that we use for almost everything. we got a bunch of incentive points for signing up, more so because we also signed up for a joint account with cibc at the time.

i also just signed up for a PC mastercard with 1% back that we use when we go to no frills, etc. that don’t accept visa.

I agree that credit cards can be a frugal spending tool–especially if you pay off your balance in full each month (we do) and you get some kind of reward that you can use to double your spending. For example, we earn gift cards to our favorite stores, like Lowe’s, by using our Mastercard. Considering that we’re in the throes of a renovation project, those gift cards from Lowe’s are money well-spend and well-earned.



I use CIBC Dividend Visa. I just received my statement with $332.00 credit for my spending this year.

I use my visa for almost everything I spend as my credit card statements become my tracking and rarely do we use debit (except at costco).

Rob, I also tend to pay off the credit card before the statement, usually weekly (it is a Sunday morning ritual at my house to reconcile my statements, bank account and visa and track my cash flow).

The reason I tend to do it weekly as opposed to monthly is that there are fewer transactions, and I recall exactly where I have been.

We use the credit card for groceries, bill payments that accept credit card payments, etc.


We split our spending between a TD Rebate Rewards card and an Amex Air Miles card. I download the numbers frequently to quicken to track everything.

We’ve been looking at switching everything except the costco shopping over to a TD Elite Travel Visa

Another reason not to use a debit card… my TD Visa was used at a compromised vendor (ie my local gas station) and cancelled and a new card sent. I was in the branch doing an unrelated transaction and the man at the wicket next to me had his debit card compromised at the same vendor. Consequently TD security locked him out of his bank account.

I travel a fair bit for work, and would rather have to replace one credit card while away from home, than have to deal with trying to get a new bank card while out of town.

Scott said: “As soon as I get home I go online and transfer the money from savings acct. to the credit card.”

So, you use it as a debit card? It strikes me that you could get the 1% (or whatever rewards) from the credit card, while leaving the cash in a high interest savings account 3% to 4% for the month. On a $2500 monthly CC bill, it could be a $10 bonus vs $2.


All our transactions go on our PC Mastercard (except Costco – common theme here;)) The reason outlined by DAvid is preciously why we pay off our CC only when due.

I agree, it makes sense to only pay off the CC when it is due. Seems silly and too much of a hassle to pay it off daily, or even weekly. I do check the online statement every few days to make sure nothing is out of the ordinary.

FT; there are debit cards with rewards programs. BMO gives 1 air mile for every $40 spent on the debit card. If you bank card is compromised, the bank might lock you out. The onus is on you to prove that you didn’t take the money, rather than the other way around with a CC. But I know of several people who had their bank card stolen, and the bank gave them back the money.

I have to make a small point about debit card fraud, as a recent victim of the same. The fraud protection is the same as for credit cards — by law, banks are required to refund you any fraudulent transactions. The downside, of course, is that it can take a week to get your refund (which can lead to cash flow issues) and you need to get a new card as others have mentioned. I don’t disagree that credit cards may be better for those reasons (despite the much higher incidence of CC fraud — because there is no PIN) but it’s not true at all that you are on the hook for debit card fraud… as long as you didn’t tell someone your PIN.

I use my MBNA platinum and I am impressed. I get 1% cash back. (it all goes into our vacation fund). As well I bought a surround sound system and 2 months after the original warranty expired my system stopped playing the dvds. I called Best Buy and then Samsung and they told were to get it repaired but it was not covered any more. I call MBNA and they covered the $200 repair as part of my extra year warranty of the platinum card.

I use the TD travel visa for most purchases (not at costco or for groceries). Great bonus for booking through TD Travel Visa, good prices.

As an immigrant, nobody issues credit cards to people on temporary status (understandably! since I could just disappear one day), so my only option is a secured card.

I still get all the rewards, no annual fee, etc., and my credit card’s actually making money through the GIC supporting it. (I pay it off in full every month, so I never pay interest.)

We too funnel all our expenses on our credit card.
we like to use President Choice mastercard ( on all our spending because its always 1% or better return and we always need groceries anyway, except for when we are renting a car or buying a plane ticket We use our no annual fee CIBC platinum card ( where we get VISA Auto Rental Collision/Loss Damage Insurance and $500,000 Common Carrier Accident Insurance and 24/7 roadside assistance in Canada or the mainland U.S. with no upfront fees and a market rate guarantee with Driver Assist.
when we are in another country we use our no fee Coast Capital VISA Desjardins Elegance GOLD card ( where we get 1.8% Foreign Conversion rate instead of the 2.5% from PC Mastercard or CIBC Platinum.

lastly we use our Costco AMEX platinum card for when we buy stuff at costco.

Another tip, we use the president choice online banking to pay our credit cards and all our bill. One easy thing to do is to keep all your money in the high interest savings account and postdate transfer it to chequing and postdate the bill payment 1 business day before the bill needs to be paid. That way your money gets some interest and you can still pay your bill on time

Thus far this year I’ve charged 73% of my expenses to either a CIBC Aerogold Visa or Amex (according to Quicken). Wish I could pay my mortgage and insurance via credit card as well. I pay my full balances each month before the statement date which means that I have can park the funds into a high interest President’s Choice savings account. More interest earned plus lots of Aeroplan miles to go along with my actual flown miles.

Similarly we put everything we possible can on my CC and pay it off the day before it is due in full every month.

As for CC rewards we have chosen the CanTire Advantage MC seems to be the best for us due to the instant redemption at the pumps. With no waiting or required accumulating of point to the level of usefulness this seem the most beneficial to us.

It is that whole one in the hand vs two in the bush that I like about it. Also have you really saved anything if you break down and get something frivolous with your accumulated points because “it’s not real money”??

Luckily you might get more than 1 month credit if the purchases is posted right after the statement cut off date! Imagine you can earn bank interest during that period. I use the Can Tire Options & PC Financial Mastercard.

We delay any of our major purchases until 2-3 days after the cut off date for that reason.

I understand what you are saying but can find it difficult to track all purchases with using a credit card and can forget about some of my earlier purchases. to stay frugal, I purchase more with debit card because by using online banking I can see exactly what is coming out of my bank account every time I use it. This helps me budget better.

I use my RBC platinum Avion card to earn one point for every dollar spent. These points can be used for travel on airlines, trains, cruise ships as well as merchandise and vacations. The feature I like the most is that I can convert my points to cash and then apply that cash against my home mortgage (paid off last year!), credit line, or towards an RRSP.

I have set up most of my utility and phone bill payments to be automatically debited from my CC, this way they are counted as a purchase and I receive points, but if you go in and pay by CC it is considered a cash advance and you are not awarded any points.

I recently cashed my points in for $500 in cash that I used to pay off the last remaining credit line debt we had. Why didn’t I use those points for merchandise or travel? The simple answer is because I wouldn’t receive any points for it. Here is how I do it.

I purchase an item on my credit card ( receive points) then I pay it off with my credit line ( at 4% interest opposed to my credit cards 19% interest) then before my monthly interest is due on my credit line I pay it in full. Later down the road I will convert my points to cash and do it all over again.

Why waste points on a trip or merchandise when you won’t be receiving a benefit for it, get the cash and use your CC to pay for your trip or merchandise, and then with the cash you get use it to pay off the bills!

I like what Donald Trump has said “your money should be at work at all times. You should think of your money as your staff; you wouldn’t let your staff sit around, so don’t let your money sit around either.

A few other things I do to stay ahead of the CC game and to maximize my point’s value are too

1- Use only one type of credit card to pay for everything
**Do not have multiple cards! It can have an adverse effect on your credit score and causes your points to be divided up (twice as long to get to the thing you want!)

2- Order a 2nd card for my wife (double the purchase, double the points)
**Using one card faithfully is a great way to improve your credit score

3- Have the CC company cancel my CC annual fee (a $170 savings)

So I use my credit card for everything except small purchases, coffee, etc. I always carry some loose change with me to cover these costs. I rarely use my debit card because I tend to go over my allowed minimums in transactions and then I get charged for them, to counter this I will go to our local Wal-Mart or Superstore and there when you are already paying for items you can also take cash out at the till, so once every two weeks when I am making a purchase I will take $100 out through the till and use that for my spare change through the coming weeks, then it is not counted against my minimum transactions and I’m not charged for it.

Anyways everyone have a very Merry Christmas and a safe and enjoyable Happy New Year

God Bless You

I agree with you FT 100%. Credit cards are great.

Debit card fraud is becoming more prevalent as well.

Get a 1% or 2% cash back card and just watch what you spend. Discipline Discipline Discipline. The cash back is after tax as well.

MBNA MC sounds good however I use 1% cash back Citi MC and don’t have any telemarketers calling (definitely a bonus).

A friend of mine paid for a nice sofa using his debit card and not his credit card. They company went bankrupt and he was out $2000. If it had been paid using his credit card he would have got his money back.

We put everything we can (even household bills) on our Amex Costco cash rebate card and keep a CIBC dividend Visa for occassions where Amex is not accepted. In addition to the cash rebate, we get to keep our hard earned money for up to 30 extra days.

Craig said:“to stay frugal, I purchase more with debit card because by using online banking I can see exactly what is coming out of my bank account every time I use it. This helps me budget better.”

With my credit card, I can review each transaction as it is posted. It resides on my online banking page between my savings account and my investment account, visible each time I access online banking. Remaining frugal, and meeting a budget has more to do with the decision-making about an expenditure before it happens, than once funds get low. Basing your purchase decisions on your account level seems like handing the responsibility for your budget to someone else, rather than truly being in control of your spending (I can’t spend any more ’cause the bank says I have no money left).

I put my debit card ONLY into a bank’s ATM, as I feel they are more secure than independent machines. I would also hate to be in a situation where someone got access to all my accounts which are connected to my debit card. I feel much more secure knowing the Credit Card losses are limited to it’s limit, and that I do not enter a PIN which could grant greater access.


I’m with Money Minder. We put everything on the Costco AMEX platinum cash rebate, since its no-fee and has up to 1.5% rebate. The rebate is capped, but we find that AMEX’s limited acceptance keeps us under the limit and hold a PC MC for backup. There is a sweet spot for your spending with this card which fits our budget well.

Personally I think AMEX is by far the best credit card company to deal with in terms of protecting the consumer. For example, we once purchased tickets on an airline that went out of business (hasn’t everyone these days?). While other credit card companies refunded peoples money on the original day of travel, AMEX refunded our money immediately.

@Craig – You don’t have to track your expenditures for the benefits mentioned – just look at the statement balance each month and pay it off in full.

CC’s are good for those that know their spending habits.

For some having a CC is a free for all until the credit limit is matched and then its a matter of making payments until the balance is decreased.

Those that get a CC should start off with a limit that is lower than their approval and within range of their typical monthly spending. So if your monthly expenses are $500/mth, dont get a $2000 limit card, but rather opt for the lower limit so your less prone to over spend.

@David I should look into what you do more. Using a credit card and utilizing an online banking page to see all of my purchases. To be honest, I have not looked into this and don’t know how. I’m sure it’s easy to set up. I agree that the person should base their own decision making on their own budgeting needs, this is something I do, seeing it online though helps out.

@Brad Every month I look at what I spend and always pay off my entire credit card bill right away when I get it so I don’t forget about it and I don’t have to worry about interest rates. Still, seeing things as they come help out and not just waiting till a month down the road. Thanks.

I use the 1% cashback MBNA MC and all my purchases show up online right away when I log on to their site. Great for tracking your purchases.

@Aman good idea on lowering your credit limit. But I would just like to add that make sure that its a little bit 2x more than your typical monthly spending. The reason is your credit rating improves if you only use less than 50% of your credit capacity. ie if you typically spend $500 a month, you should set you credit limit to somewhere around $1000 to $1500. This will help build your credit rating faster

yeah i try and do the same thing with my credit cards. although, i have tried just using hard cash, and that works pretty well, especially with bigger purchases. i guess it seems harder to let go of all those $20 bills :/

Actually sometimes using the debit card associated with a rewards checking account that yields 6% and pays interest monthly could be a better option than using a credit card with 1% cash back..

Have you some Canadian sources of such reward accounts?



Unfortunately I only know of US rewards checking accounts.

I think that the Canadian retail bank market is more concentrated in the big 5 unlike the US market which is concentrated, but also consists of thousands of community banks..

We use the PC Mastercard for all of our purchases and pay it off completely when it is due. This way I can look at our spending with Microsoft Money. Plus the points on this card add up fast — throw in some more with fuel at Superstore and using your own shopping bags and you’ll be amazed at how many free groceries you can get. I estimate $400-500 per year in free groceries. The card has no fee and the points can be redeemed instantly at the checkout.

There are some cards out there that offer 1.25% if you search carefully.

Some of you on these forums are hilarious. I hear people talking about using a 4 percent credit line to pay off a card that gets you 1 percent rewards, and other people talking about paying off their mortgage with their credit cards, and people keeping money in their high interest savings accounts when they have a mortgage. LOL. Ahahahaha. If you were intelligent you would pay off your mortgage with the money you seem to have available in your high interest savings accounts, and you would not use a 4 percent line of credit to pay your card bills. I hear other people talking about BUYING coffee. You BUY coffee and you think you are getting rewards back from your credit card? The amount you spend BUYING coffee a few times is more than the rewards you get in a year from a credit card! Same goes with buying small meals out (10-20 dollar purchases).

Make your own damn $0.10 coffee and meals, heat up the house while your coffee maker is on in the winter, and rarely pay a coffee shop 5 dollars for a coffee. Please, and I guarantee you will save more money than you ever did racking up rewards. Coffee in the summer can be used to go into a cold sweat to cool off – but make your OWN.

Plus, if you get rewards AND you stop paying idiot companies for styrophoam cups of coffee, you get the benefit of actually making money on the rewards instead of before where you were just LOSING all your rewards by purchasing the donuts and coffee! Do not get me started on fast food, or Girl Friends either.

For those of you using debit instead of your credit card at Costco, I found a great way around this – buy a costco cash card online with your credit card. I did this for Christmas. Got the points, no extra shipping fee, used the cash card to pay at Costco. The only pain is that you can’t reload the same card online – you have to keep buying new cards.

Talking about costco. Another interesting thing with gift cards is that you can give them to someone with no Costco membership, this will allow them to shop at Costco. Also they can refill the gift card when its empty at the cashier. I saw this gentleman do this.

@elman – just let the recipients know- they have to pay a 10% (? could be a little less) premium over the product price if they don’t have a membership. Makes things not so great a deal.

We use our PC mastercard for gas, insurance premiums and groceries and Citi Enrich mastercard for everything else. Straight cash back from Citi, I personally prefer that to points.

In 2002, we switched from the Enrich to the Driver’s Edge coz we knew we were going to buy another car in the near future. Received a $500 cheque after the purchase and switched back to the Enrich.

And of course, the cardinal rule of paying off balances in full every month.

I use a card too … PC at 1% towards groceries … however, the big picture is that the card costs are passed on to the consumer … my understanding, 2% to 4% There’s sometimes a discount available for using debit or cash. For those bigger items, ask about a discount for using debit or cash. Fwiw, I’d estimate my costs for the convenience of a “no fee” credit card are likely $600 or so per year to cover that 2 to 4%.