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Cashback credit cards 2021
Earn cash rewards for every purchase you make when you shop with a cashback credit card in Canada.
Compare cashback credit cards
What is a cashback credit card?
A cashback credit card is a card that lets you reclaim a small percentage of what you spend on your credit card back in the form of cash. This money accumulates under the rewards section of your credit card statement or online banking, and is usually displayed as a separate cash balance on your account. When you’re ready to redeem your cash, you will typically apply it to your credit card to pay off a portion of the amount you owe.
Typical features of a cashback credit card
Basic cashback credit cards. These cards often come with low or no annual fees. They usually let you earn between 0.5% and 2% in cash back, and most come with few additional benefits aside from purchase protection and extended warranty coverage. Examples include the Tangerine Money-Back Credit Card and the Brim Mastercard.
Premium cashback credit cards. Premium cards usually come with fees between $120 and $150 per year. They may let you earn between 3% and 5% cash back on purchases, and many come with extra benefits such as car rental insurance, travel insurance and mobile device protection. Examples include the TD Cash Back Visa Infinite Card and the BMO CashBack World Elite Mastercard.
How does a cashback credit card work?
You’ll typically earn between 0.5% and 5% cash back on purchases – depending on what type of card you have (basic or premium). This percentage may be applied as a flat rate to any amount you spend on your card. You may also earn different percentages for individual purchases depending on which spending category they fall into.
Once you’ve earned enough money on your account, you can redeem your cash back towards a statement credit on your account. Some credit card companies may also let you exchange your cash for rewards such as gift cards or merchandise, though this is less common.
Three types of cashback cards
There are three main types of cashback credit card in Canada, each coming with a slightly different rewards structure:
- Flat-rate cashback cards. Flat rate cards let you earn a set cashback rate on all of your purchases. For example, you might earn 1.5% cash back on everything you buy regardless of which spending category your purchase applies to.
- Best for people who want to earn a higher flat rate across all purchases instead of earning accelerated cash back in certain spending categories.
- Tiered cashback cards. Tiered cards usually offer different cashback rates based on which categories you spend money in. For example, you may be able to earn a fixed rate of 3% on travel purchases, 2% on gas and grocery purchases, and 1% on everything else.
- Best for people who want to earn accelerated rewards for spending money on targeted categories such as gas, groceries or travel.
- Rotating categories cashback cards. These are similar to tiered cards, except you get to choose which categories you earn more cash in. For example, you may be able to choose a high cashback rate for gas and travel in one month, followed by a high rate for groceries and bill payments in the next month.
- Best for people who spend money in different categories each month, and want to choose their accelerated rewards accordingly.
Where can I get a cashback credit card in Canada?
You can get a cashback credit card from banks, credit unions and private institutions. Check out the table below for samples of the types of cashback cards offered by popular institutions in Canada:
Which cashback credit card type has the best value?
You’ll earn a percentage of any money you spend on your credit card in cash back, with variable rates based on which type of card you have. Here’s a quick comparison of the cash back you might earn from the different card types based on our sample budget:
- $3,000 per year on dining and entertainment
- $6,000 per year on groceries
- $5,000 per year on other purchases
Remember that signup bonuses and annual fees can change the amount of cash back you earn, as well as any restrictions the provider places on annual allowable earn rates.
1. Flat rate cashback credit card
|Category||Annual spending||Reward rate||Cash back|
|Dining and entertainment||$3,000||1.4%||$45|
A flat rate cashback card with a 1.5% flat cashback rate would give you $210 in rewards.
2. Tiered cashback credit card
|Category||Annual spending||Reward rate||Cash back|
|Dining and entertainment||$3,000||4%||$120|
A tiered cashback credit card would give you $290 in cash back with a higher rate for dining and groceries and a lower rate for all other purchases.
3. Rotating categories cashback credit card
|Category||Annual spending||Reward rate||Cash back|
|Dining and entertainment||$3,000||2%||$60|
A rotating categories card would give you $230 in cash back. Ultimately, the cash back you earn depends on your preferred categories and how you allocate your spending.
It’s important to note that you’ll only receive cash back for “eligible purchases”. Other transactions such as cash advances, buying gift cards or spending money in a casino may not give you a cashback return.
Is a cashback credit card right for you?
While the opportunity to earn cash back may sound appealing, cashback credit cards aren’t for everyone. A cash rewards credit card may be ideal for you if you:
- Pay your balance in full every month. Paying interest on a cashback credit card can add up quickly. Spending money on interest negates the cashback rewards you earn on your credit card.
- Earn more in cash back than you spend on your annual fee. You’ll want to make sure that you earn enough cash back to justify spending money on an annual fee. If you don’t, it could make sense to opt for a low or no fee cashback credit card with a lower cashback return rate.
- Can responsibly use a credit card. Earning the maximum amount of cash back means using your credit card as frequently as possible. However, you should spend only what you can afford to pay back and to use your income to pay off your credit card balance rather than to make additional purchases.
How to maximize your rewards
You can maximize your cashback credit card rewards in the following ways:
- Choose a credit card with a solid signup bonus. Some credit cards will let you earn up to 10% on all purchases in your first 3-10 months. Find a card that offers a long-term welcome bonus with a solid return rate, and reserve large purchases for your intro period.
- Spend enough to earn the signup bonus. Make sure you spend enough on your credit card to actually earn the welcome bonus on your card. For many cards, you may need to spend up to $3,000 in your first 3 months of card ownership to take advantage of your welcome bonus.
- Choose a card that offers accelerated rewards. Find a card that lets you earn higher cashback rates in the categories where you spend money most often. For example, if you regularly spend large amounts on groceries, you could benefit from a card that offers higher rewards at grocery stores.
- Align rotating categories with your spending habits. Align your spending categories with the way you spend money each month if you sign up for a rotating categories cashback credit card in Canada. This will ensure that you earn the maximum number of rewards for every dollar spent.
- Pay off your balance and avoid cash advances. Pay off your balance every month to save money on interest and avoid making transactions on your card that won’t earn you cash back. These include non-eligible purchases such as gift cards and cash advances.
Benefits of a cashback credit card
You can expect to enjoy the following benefits with a cashback credit card:
Decent return. Earn cash back on purchases (0.5% to 5%).
- Low fees. Many cashback credit cards come with no or low annual fees.
Accelerated rewards. Earn more cash for categories such as groceries, dining, travel and entertainment
- Signup bonuses. Earn up to 10% in your first few months of card ownership.
What to watch out for with a cashback credit card
You should watch out for the following drawbacks with a cashback credit card in Canada:
- High interest rates. You’ll typically need to pay between 19.99% and 21.99% on purchases and cash advances.
- Foreign transaction fees. You may have to pay foreign transaction fees between 1% and 3%.
- No points. You won’t earn points that you can collect to exchange for travel, merchandise or gift cards.
- Cashback limitations. You may lose out on rewards if you exceed cashback limits on your account.
How to choose the best cashback credit card for your needs
You can compare the following features to find the best cashback card for your needs:
- Annual fee. Basic cashback cards come with no annual fee while more premium cards usually cost between $120 and $150 per year.
- Signup bonus. Most cashback credit cards come with a signup bonus that lets you earn between 6% and 10% in your first few months.
- Redemption options. The majority of cashback credit cards let you redeem your cash for a statement credit on your account while a few let you exchange your rewards for merchandise, travel rewards or gift cards.
- Base cashback rate. You’ll usually earn a base rate of between 0.5% and 1.5% when you spend money on purchases that don’t qualify for accelerated rewards.
- Additional benefits. Many basic cards come with purchase protection or extended warranty coverage. Premium cards may come with extra benefits such as mobile device protection, roadside assistance and travel insurance.
Who are cashback credit cards best for?
You may want to consider a cashback credit card if you fall into these categories:
- You would prefer to earn cash. You could benefit from a cashback credit card if you want to earn cash to pay down your credit card.
- You want more flexible rewards. You might prefer a cashback card if you’d like to use your cash to pay down your balance or get yourself out of debt.
- You don’t travel regularly. You may have more use for a cashback card if you don’t travel regularly and have no desire to collect points or miles.
- You don’t want your rewards to expire. You’ll likely appreciate that cash rewards don’t expire after a certain period unless you close your credit card.
How do I redeem cash back?
You can redeem cash back by applying it as a credit on your credit card balance. Your total cash back will often be showcased somewhere on your credit card statement or in your online banking app. You simply need to click “Redeem Rewards” to have it applied to your account.
Cashback redemption options
Many providers will pay out your cash rewards on request, while others will transfer your rewards balance onto your statement on a monthly or yearly basis. A handful of providers may also let you exchange your cash for gift cards, merchandise, travel rewards or charitable donations (though this is uncommon).
A cashback credit card may be a good fit for you if you want a simple and transparent way to collect credit card rewards. You can choose from flat rate, tiered and rotating category cashback credit cards. Finding the right cashback credit card will allow you to collect as much as 0.5% to 5% in cash back on every dollar you spend, plus even more when you factor in welcome bonuses and accelerated rewards.
Frequently asked questions
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