Canada’s Best Credit Cards 2015: Methodology
How we calculate rewards to evaluate and compare cards
How we calculate rewards to evaluate and compare cards
To help you find the best card we dissected more than a 200 credit cards to understand how they dish out their rewards. We looked credit cards issued by RBC, TD, Scotiabank, BMO, CIBC, National Bank, HSBC, Capital One, MBNA, Hudson’s Bay President’s Choice, Canadian Tire Financial, American Express, Chase and Desjardins. We did not look at every card offered by each issuer, nor did we look at credit card products that are only available in one province or region.
Our ranking breaks down into the core rewards programs, which consists of cash-back, travel and retail rewards, for consumers, businesses and students. We also examine the best low-rate cards for consumers, businesses and students.
This list is based on scenarios and assumptions built around how a typical holder might use the card and may vary from how you actually use your cards. Our data is current as of July 2015. In all cases we used a five-year average for rewards, dividing the benefit of any sign up bonus points across the five years. We only included sign up bonuses or teaser interest rates that were standing offers, excluding those with specific deadlines. We deducted annual fees from the value of the rewards.
For consumer cards, our calculations assume the cardholder is spending $2,000 on their card each month. If a card offered extra points on certain types of spending then we factored that in as well. Extra rewards for various spending categories were calculated based on the following spending patterns:
Re-occurring bills: 10%
If extra rewards were given for gas from a specific retailer, we assumed all gas was purchased there. If extra travel rewards were given based on using a certain travel agency, we assumed all travel was booked through that service.
We also award extra points for Air Miles and Aeroplan programs. For Air Miles we will assume up to 50% of spending is eligible for the extra rewards, whereas for Aeroplan we assume only 15% of spending is eligible for the extra credit.
For retail cards the percentage of spending eligible for extra points varies depending on the nature of the store and how much the average person might reasonably spend at that particular retailer. For instance, for the Scotiabank Scene program, which is affiliated with Cineplex, we assume only spend 5% of cardholder spending (or $100 a month) on movies, whereas for Walmart we assume a total of 30% of all card spending could be at this store (20% for groceries and 10% on general merchandise).
For travel cards, we looked at how many flights you would earn, basing the value of the flights before taxes on the three-day average prices on 25 common routes at two different times of year to ensure a balance of low and high season fares. If the flights required redemption of miles or points, we used the average number of points needed for those flights, based on the redemption schedules as published by the provider. If a card offered additional points for every flight booked on the card, we would determine how may flights a cardholder spending $2,000 a year could book over the five year period, spending 10% on travel. Some travel cards offer discounted companion flight. We factored the value of this perk into our analysis as well by deducting the fee for the companion fare from our average flight cost. In the case of WestJet the average flight cost was adjusted to include only routes serviced by that airline.
For merchandise cards we determined how many points/miles you would need to buy a basket of gift cards as well as at least one item from the cardholder’s catalogue. For merchandise we select products where the price was the same across multiple retailers and tend not to go on sale.
The best low rate cards were determined as having the lowest overall cost to the user. As a result, this calculation only looks at the interest and fees charged to a cardholder who carries a balance $2,000 for consumer cards and $25,000 for business cards. Points, if offered on the card, were not factored in.
The best cards for small business follow a similar methodology to the consumer cards. Like consumer cards, we break out the best credit cards for small business into categories—low rate, cash-back and travel. The only differences being that we assume the business owner charges $25,000 on the card each month. While businesses are unlikely charging groceries on their cards, it’s quite common they will be renting cars. We assume 10% of spending on business cards goes towards rental cars.
For student cards we lowered the monthly spending level to $1,000. To identify the lowest cost card for students we calculated the total cost of interest and fees across carrying a balance of $1,000. Of course we recognize that not every student will carry a balance on their cards so we also calculated the best rewards card for students, following the same methodology used for the consumer cards. Given the limited choice available for students the rewards cards were grouped together in one category.
Published by MoneySense™ magazine, the Canada’s Best Credit Cards 2015 ranking evaluated certain credit cards on category-specific criteria, based on publicly available data as of July 2015. Usage assumptions made to calculate the value of the rewards may not reflect your own use. The Canadian credit cards available and the specific credit card terms may have changed since the data was compiled. Canada’s Best Credit Cards 2015 ranking is created for information purposes only and is not intended as financial advice. The information provided is not guaranteed and no representations or warranties can be made as to the accuracy or completeness of such information.
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