Choosing a new credit card can be exciting, but it’s easy to get lost in the myriad of perks and fees. Whether you’re looking for a new card to improve your credit score or maximize your budget, the search can quickly become overwhelming. But although many rewards card offers are impressive, the top cash back credit cards in Canada are usually a better deal and easier to manage. Not quite sold? Check out our top reasons to choose a cash back credit card rather than a rewards credit card.
It’s easier to compare perks
When reading up on different rewards credit cards, you’ll notice that each card offers a different type of perk: travel vouchers, hotel points, movie passes, outings, and so on. The list is neverending. But with so many rewards categories, it’s extremely difficult to determine which cards are the best deal.
Should you go with the card that offers 10 travel points per dollar if you’d need 100,000 points to book a short flight? Another card might seem to have a better valuation, but bonus redemption periods might make the first card a surprisingly good deal. Either way, your free trip will quickly turn into a headache.
In contrast, Canadian-dollar cash back cards use the same currency so it’s easy to compare rewards. Some cards might offer bonus cash back for certain categories like grocery or gas. However, a few quick calculations based on your spending analytics will quickly show you which card will provide you with maximum returns.
Cash has a set value while points do not
Cash back perks have a set value. When you make a purchase, you know exactly how much your rewards will be worth, regardless of whether you receive the rebate tomorrow or in a year. Unfortunately, loyalty points lack this stability. Even though you might earn the equivalent of a movie ticket after spending $700 with your cinema-brand credit card, points systems can generally be overhauled at a moment’s notice. Unfortunately, this almost always means that perks become more expensive to redeem.
Better spending categories
Both cash back and rewards credit cards typically come with designated bonus categories or businesses that offer higher rewards. For example, an airline’s credit card may give you extra points when booking a flight while a cash back credit card may offer bonus cash back on groceries or gas. However, while loyalty point cards typically only offer bonus points on purchases with select partnered businesses, cash back cards offer extra rebates at a wide variety of establishments. Admittedly, some basic entry-level cash back credit cards do not offer bonus categories so you’ll have to verify the exact rewards that each card offers. However, the flexibility and extra rebates that cash back cards’ bonus categories afford are extremely valuable.
Get what you want when you want it
Whether you collect travel vouchers or loyalty points, rewards cards limit your spending. Although some loyalty programs do offer a large catalogue of impressive rewards, they typically require a lot of points and cost more points per the reward’s dollar value than less desirable rewards. In comparison, cash back rebates allow you to buy whatever it is that you want. It also generally takes less money to earn an expensive product’s value in cash back rebates as opposed to its loyalty point equivalent.
Travel is uncertain at the moment
We’ll admit it: top travel cards are great for frequent flyers. However, those who rarely travel may struggle to earn enough points to book a flight. Additionally, recent world events have made travel somewhat unpredictable; border regulations change rapidly and you may become sick just before your trip, forcing you to stay home. Given all of the uncertainty around travel at the moment, it might be wise to opt for credit cards that offer rewards that you’ll definitely be able to redeem.
Work towards your financial goals
If you’re saving for a big purchase, cash back rewards allow you to access bonus money that can be put towards your goal. If you are mailed a cheque, the cash can go straight into your savings. Many cash back cards opt to provide you with a rebate on your credit card bill, but this money will automatically be put towards any essential purchases on your card which you would’ve made anyways. This allows you to put the extra money that would’ve gone towards the essentials into your savings account. Either way, you’ll have plenty of extra money to put towards your goals.
Enjoy minimal fees
Since cash back credit cards are relatively straightforward, they’re less work for issuers. As a result, they typically also have smaller annual fees. You’ll be left with even more money to save, budget, or enjoy!
Introductory 0% APR rates are common
Many cash back cards have introductory 0% annual percentage rates (APRs). Though exact time frames vary, it isn’t uncommon for these bonus rates to last anywhere between 6-12 months. Whether you’re expecting a large expense or are dealing with existing credit card debt, a 0% APR rate is an excellent opportunity to make interest-free payments.
Cash rewards are hassle-free
Hoping to redeem your rewards credit card’s points? You’ll have to order your picks through their rewards portal and may even face restrictions or higher prices if your reward of choice is in high demand. In contrast, cash back rewards are sent to you via mail, email, or directly added on to your next credit card bill, minimizing any potential headaches that the redemption process may cause.
Cut down on unredeemed rewards
What do travel vouchers, gift cards, loyalty points, and other rewards credit card perks all have in common? There’s a chance that you’ll forget to redeem them! Instead, their valuation will go right back into your credit card provider’s bank account. Since most cash back credit card rewards are automatically redeemed, you won’t have to worry about money going to waste. Instead, you can rest assured that you’re getting the maximum value for all of your rewards.
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About The Author: Arthur Dubois
Passionate about personal finance and financial technology, Arthur Dubois is a writer and SEO specialist at Hardbacon. Since his arrival in Canada, he’s built his credit score from nothing.
Arthur invests in the stock market but doesn’t pay any fees because he uses National Bank Direct Brokerage online broker and Wealthsimple’s robo-advisor. He pays for his subscriptions online with his KOHO prepaid card, and uses his Tangerine credit card for most of his in-store purchases. When he buys bitcoins, it’s with the BitBuy online platform. Of course it goes without saying that he uses the Hardbacon app so that he can manage all of his finances from one convenient place.
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