Earn money while you spend with Cash back credit cards. Why not get rewarded while using a credit card to make purchases? Cash back credit cards in Canada offer anywhere between 1% to 5% money back for every dollar spent using your cash back card. Some cash back cards may charge an annual fee, or in some cases a high interest rate. Compare and apply for the best cash back credit card in Canada.
Cash Back Credit Cards
Credit card companies may offer you reward points so you can buy gas, movie tickets, travel tickets, groceries, and various other items free of cost. However, if you would prefer cash rewards instead, you might want to opt for a cash back credit card.
Cash Back Credit Cards
Cash back credit cards allow you to earn back some of the money you spend when making purchases of goods and services. You could receive the rebate amount by way of credit each month in the credit card statement. Or, the company might send you a cheque in the mail after a fixed period like a year or preset milestone you attain. However, since you earn this rebate on the purchases you make, you'll need to take care not to spend too much. If you go over the limit, you could end up paying a high amount of interest that could even out the cash benefit you receive.
Working of Cash Back Credit Cards
Your credit card company allows you a rebate on certain purchases and this amount works out as a percentage of your purchase. This percentage varies according to the specific items you buy. For example, the Scotiabank Momentum VISA Infinite gives you:
- 4% cash back on gas refills and groceries
- 1% to 2% cash back on all other items
Here are some other factors to keep in mind:
- The credit card company charges you an annual fee for the cash back facility. Before buying it, make sure you intend to use the card often so you can cover the fee with the cash
- The cash back facility rebate does not cover interest charges, cash advances, and balance transfers.
- If you typically pay cash to buy gas and groceries, using your credit card could be a money saving option.
Positives and Negatives of the Cash Back Credit Card
The best advantage of the cash back credit card is the cash rewards you can earn on every purchase. Most credit card issuers may allow you from 1$ to 4%. However, there are various negatives you need to watch out for:
- Certain cash back credit card companies put a limitation on the rebate you can earn each month. For instance, an issuer might allow you a rebate of 1% on items worth $2,000 each month. Purchases above this amount may be exempt from the facility. Accordingly, you’ll earn $20 per month even if you’ve spent $2,100. In that case, if you expect to spend more than $2,000 each month, you might want to look for a company that does not fix a limitation, or has a higher limitation.
- The possibility of earning a rebate on your purchases can make you overspend or buy items you don't need. If you think you're spending too much, reconsider your decision to use the cash back scheme.
- While the cash back facility on your credit card is a great scheme, you should use it cautiously. Choose a card that matches your regular expenses so that you can pay off your balance each month, avoid incurring interest, and avail of the cash back benefits.
Cash Back Credit Cards Canada
Should you scout around the Canadian market, you’ll come across several credit card issuing companies that offer you the cash back facility on credit cards in different ways. Here are the options you may find.
- At the end of the month, you might receive a percentage of the total amount you spent as cash back.
- You may receive a one-time cash back amount by way of a promotional offer.
- You may be allowed the option to convert your reward points into a cash credit in your account.
Read ahead for added information of the various cash back credit card options. You’ll also learn their features so you can choose the one that matches your needs best.
Cash Back Credit Cards Explained
Credit card issuers may reward subscribers with money credited to their account when they use the credit cards for making purchases. Each company has different systems by which they offer rewards:
- Particular dollar amount
- Percentage of every purchase you make
- One-time rebate on signing up
- On expenditure of a fixed amount within a specific time frame
- Promotional cash back schemes for existing customers for spending at a particular retailer or store like for instance, $30 for purchases in ABC Grocery Store.
How do Cash Back Cards work?
When shopping for cash back credit cards, you might want to check the terms and conditions offered by each card issuer by reading the Product Disclosure Statement before making your choice. Remember, refunded purchases, balance transfers, and cash advances may not be included in the cashback scheme.
Here are the different methods by which companies offer cash back rewards.
- You earn cash back each time you make a qualifying purchase on the card. For instance, if your card provider offers 3% cash back deal and you make purchases on $1,000, you’ll receive a rebate of $30.
- The card provider offers the cash back scheme to new customers on signing up. If you apply before a certain date and purchase items worth a particular amount before a due date, you receive cash back.
- The card provider allows you to redeem reward points on flights and purchases for cash that is deposited into your account.
Positives and Negatives of Cash Back Credit Cards
Cash back credit cards can have both positives and negatives that you need to weigh carefully.
- You can get back some of the money you spend on the purchases. Every single dollar is welcome.
- Credit card companies may offer you additional complimentary packages on cash back credit cards such as concierge services, rewards programs, and travel insurances, among others. These add-ons may raise the value of the card.
- Cash back credit cards typically carry high annual fees. It is advisable to opt for such cards only if you make large purchases and earn back a substantial amount of cash. This cash should be enough to cover the annual fees with some added cash left over.
- Some credit card issuing companies may allow you to use the offer only a limited number of times within a fixed period. Or, they may allow you to use it only once. Also, check for the total number of times you can use the cash back scheme.
- When making purchases, you must make sure you can pay back the credit card bill before the due date on the statement. If you cannot pay the bill, you could incur high rates of interest that may make you end up paying more than the cash you earned.
Best CashBack Credit Cards Canada
A cash back credit card is basically a credit card with rewards. In other words, it allows you to earn a certain amount of money as cashback for every dollar you spend using your card. The percentage you could earn varies from bank to bank, anywhere from 1% to 4%, or even more with special promos. Once you reach a certain milestone, the cashback reward comes either as credit to your account or a cheque is issued.
Note: There can be a limit to your cash back. Check the bank’s policy before you apply for a cash back credit card.
Is there an annual fee for a cash back credit card?
Some cash back credit cards in Canada come with an annual fee. It is important to take the annual fee into account before applying for a cash back credit card. Do some math to evaluate your monthly spending vs. the annual fees. It would only make sense to apply if the result is positive. But there are some great cash back credit cards such as Tangerine Money Back Credit Card with no annual fees and Scotia Momentum Visa Card with a low annual fee of $39. Compare all cash back credit cards to find the one that suits you best.
Do I need to pay my credit card balance monthly?
Yes. Although a cash back reward could be tempting, you anyways shouldn’t spend more than you can afford to pay back. It’s true that there are financial rewards with cash back credit cards, but they won’t be able to cover your debt entirely. It is also important to pay the entire balance each month to avoid high-interest charges. The Alterna MBNA Rewards card with no annual fees, low-interest rate, and cash back rewards proves to be a win-win for all.
Compare cash back credit cards
With so many cash back credit cards in Canada, start by comparing the reward rates and annual fees. Some cash back credit cards offer 4% cash back, but charge high annual fees - turning out the cash back is mostly covered from your own pocket!
When applying for cash back credit cards make sure you assess your spending habits. Big spenders should apply for cash back credit cards that reward their appetite for spending with high reward rates. The moderate and lower spenders will do just fine with standard cash back credit cards that also have a lower annual fee.
It’s always wise to choose your cash back credit card considering the type of items you plan to purchase. There are different types of cash back credit cards and many of them focus on certain types of items, such as groceries and gas, or even a specific category of products. You can also use them for paying your monthly bills.
Compare cash back credit cards according to your type of spending, and choose the card that fits your lifestyle.