Choosing the right credit card can significantly impact your finances, especially when it comes to maximizing the rewards. Cashback and rewards credit cards are two popular options, each offering different benefits. 

If you’re struggling to decide between the two, we’re here to guide you through how they work and how to choose the best one for you. 

In this post, we’ll explore:

• Cashback credit cards 

• Rewards credit cards

• How to choose the best credit card for you 

Cashback Credit Cards

Cashback credit cards give you a percentage of cashback on your purchases. Some cards will offer a higher earning rate of cash back on certain spending categories, like groceries, gas, and recurring bill payments, while others will only offer a flat cash back rate. 

Cash back can be used towards your statement balance, gift cards, travel, and more. 

Photo by PiggyBank on Unsplash

How Does Cashback Work?

Using a cashback credit card does not automatically earn you cash back in your account after every purchase. It is calculated based on the amount you spend and the percentage of cashback you earn on it. 

Some credit cards offer a flat rate of cash back on every purchase, while others offer a higher percentage of cashback on certain purchases, like groceries and recurring payments. One of the best cashback rewards credit cards for an elevated earn rate in these categories is the Scotia Momentum Visa Infinite Card, which gives you 4% back on recurring payments like subscriptions, bills, and even your rent.

The higher earn rate categories sometimes have a limit as to how much cash back you can earn. For example, the Scotia Momentum card caps the 4% cash back at $25,000 annually. If you spend more than this, you will earn 1% cash back until the next year.  

Cashback is generally calculated daily and paid out monthly, yearly, or when you hit a minimum balance, but each card is different. 

How to Calculate Cash Back

To calculate cash back, you can use this formula: purchase price x cash back percentage (as a decimal) = total cash back. 

Let’s say your cashback credit card gives you 4% back on recurring bill payments, and you pay $1,500 in rent with it. You can calculate it like this: $1,500 x 0.04 = $60. Each month you pay rent with your credit card, you’ll get $60 back. 

Pros and Cons of Cashback Credit Cards 

Let’s compare the advantages and downsides of cashback credit cards. 

Pros:

• You earn cash back on every purchase

• You can earn an elevated amount of cash back on high-spend categories 

• They generally have lower annual fees 

• Some cashback credit cards have automatic redemptions 

Cons:

• Cashback may only be paid out once a year or when it hits a certain threshold 

• There may be a smaller welcome bonus 

• There may be less perks and benefits than a rewards card 

• There are usually earning caps on high-spend categories 

The Best Cashback Rewards Credit Cards in Canada

Here are our top picks for the best cash back rewards credit cards in Canada. These generally pay out more cashback on high-spend categories, like rent payments. 

• Scotia Momentum Visa Infinite Card – earn 4% cash back on groceries and recurring payments, 2% back on gas and transit, and 1% back on everything else 

• TD Cash Back Visa Infinite Card – earn 3% cash back on groceries, gas, and recurring bill payments (like rent), and 1% back on everything else 

• SimplyCash Preferred Card from American Express – earn 4% cash back on gas and grocery purchases, and 2% back on everything else.

Rewards Credit Cards

Rewards, or points credit cards, earn you points on each purchase that can be redeemed for flights, hotels, travel upgrades, statement credits, merchandise, gift cards, and more. The rewards will differ based on the points program. 

Generally, there are five different rewards cards: 

General Rewards

You earn rewards on everyday purchases, such as groceries and gas. General rewards cards often allow you to redeem points for anything, and they are not specific to one airline or loyalty program. 

A few great general rewards credit cards include:

• American Express Cobalt Card – earn 5x points on food, 3x points on streaming subscriptions, 2x points on transit, and 1x points on everything else

• Scotiabank Gold American Express Card – earn 6x points on groceries, 5x points on food, 5x points on entertainment, 3x points on gas, transit, and streaming services, and 1x points on everything else 

• American Express Green Card – earn a flat rate of 1x points on everyday purchases, plus 1 additional point for every $1 spent on Amex Travel Online 

Airline Rewards 

With airline credit cards, you’ll earn points with specific airlines, like WestJet, Air Canada, and British Airways. These credit cards are best for customers loyal to one airline; otherwise, they can be a bit limiting. 

Some of the best airline rewards credit cards include: 

• American Express Aeroplan Reserve Card - earn Aeroplan points for Air Canada and Star Alliance flights

• RBC British Airways Visa Infinite Card – earn Avios points for British Airways flights 

Travel Rewards 

Travel rewards cards are a bit more relaxed than airline rewards cards. With them, you can earn and redeem general points that can be used for all kinds of travel purchases. Most come with added benefits, like travel insurance, airport lounge access, and no FX fees. 

Some of our favourite travel rewards credit cards are:

• Scotiabank Platinum American Express Card – earn 2x Scene+ points on all purchases, plus get no foreign transaction fees, airport lounge access, and travel insurance coverage 

• The Platinum Card from American Express – earn up to 2x Membership Rewards points on all purchases, plus a $200 dining and travel credit, unlimited access to airport lounges, and travel insurance 

• TD First Class Travel Visa Infinite Card – earn TD Rewards points on all purchases, plus an annual TD Travel Credit, rewards bonuses, and travel insurance coverage 

Photo by John McArthur on Unsplash

Hotel Rewards 

Hotel credit cards are great for travellers loyal to one specific hotel chain, such as Marriott or Hilton. These credit cards allow you to earn points on every purchase, which can be used towards free hotel stays, upgrades, and more. 

The most well-known and best hotel points credit card in Canada is the Marriott Bonvoy American Express Card, which earns you 5x the points per $1 spent at Marriott Bonvoy hotels and 2x the points per $1 spent on everything else. 

Store Rewards 

With store-branded credit cards, you earn points on every purchase at that specific retail store, and can redeem them for credit on your next purchase. These credit cards generally don’t offer high rewards and have little benefits outside of saving money in that store. For this reason, we don't recommend using them to pay your rent.

Some of the top points credit cards for retail stores include:

• PC Insiders World Elite Mastercard – earn 40 PC Optimum points per $1 spent at Loblaws stores, 50 per $1 spent at Shoppers Drug Mart, 40 per $1 spent at Joe Fresh, and 10 per $1 spent on everything else 

• Triangle Mastercard – earn 4% back in CT Money at Canadian Tire-branded stores, 1.5% back on groceries, and 0.5% back on everything else 

• Tim Hortons Credit Card – earn 15 points per $1 spent at Tim Hortons, 5 points per $1 spent on groceries, gas, and transit, and 1 point per $2 spent everywhere else

Best Credit Card Rewards Programs in Canada

Some of the best card reward programs in Canada include: 

American Express Membership Rewards 

Most American Express credit cards let you earn and redeem Membership Rewards points on every purchase. These points are versatile and let you redeem for a number of different things, like travel, statement credits, gift cards, merchandise, and more. You can even transfer the points 1:1 to your favorite partner's loyalty program. 

Some of the best Amex credit cards for earning points include:

• American Express Gold Card

• The Platinum Card from American Express

Read more about the American Express Membership Rewards program.

Aeroplan

Aeroplan is Air Canada’s rewards program. You can earn Aeroplan points when booking flights and at certain retailers, like Starbucks and Uber. They can be redeemed for domestic and international Air Canada flights, starting at only 6,000 points. 

It’s free to join Aeroplan, but you’ll earn more points if you use an Aeroplan credit card, like these:

• CIBC Aeroplan Visa Infinite Card

• American Express  Aeroplan Reserve Card

• TD Aeroplan Visa Infinite Card

Learn more about the Aeroplan rewards program in this article.

SCENE+ 

Most of Scotiabank’s credit cards are part of the Scene+ program, which allows you to earn points on groceries, pharmacy purchases, travel, restaurants, and at Cineplex. Scene+ points can be redeemed for a statement credit, discounts at grocery stores, travel purchases, and more. Scene+ credit cards are some of the best points cards in Canada, due to their versatility and often high earn rate. 

Some of the best Scotiabank credit cards that are part of the Scene+ program include: 

• Scotiabank Passport Visa Infinite Card

• Scotiabank Gold American Express Card

Read more about the Scene+ program here.

Air Miles 

With the Air Miles Rewards Program, you can earn and redeem Air Miles, which come in two kinds: Cash Miles and Dream Miles. Cash Miles are used on purchases at partner stores, while Dream Miles are used for travel bookings. 

Currently, BMO is the only credit card company that allows you to earn Air Miles on everyday purchases. Their two Air Miles credit cards are:

• BMO AIR MILES Mastercard

• BMO AIR MILES World Elite Mastercard

If you’re applying for a BMO credit card, remember that the value of BMO Rewards points differs from Air Miles points. 

Pros and Cons of Rewards Credit Cards 

Here are the biggest pros and cons to consider when choosing a rewards credit card:

Pros:

• There are multiple credit card types and redemption options 

• If you are loyal to one airline or company, you can earn tons of points 

• They generally have a better redemption value than cashback cards 

• There is generally a larger welcome bonus than cashback cards 

Cons:

• You likely need to save up for a while to redeem travel points, but you can do so faster by paying rent with your credit card 

• They typically have higher fees than other types of credit cards 

• If you don’t travel or are loyal to a specific company, it may not be worth it 

• The top points credit cards require a high credit score and high annual income 

How to Choose the Best Credit Card for You 

If you’re trying to decide which type of credit card is best for you, consider the following: 

Value of Points

Before deciding on a points credit card, calculate how many points you could earn vs how much you need to spend. Sometimes, points are valued at something like 1,000 points = $1, or 1 cent per point. If you’re redeeming those points for flights or travel, you’ll need to use a lot of points and calculate the value, especially when prices fluctuate. 

Some credit cards offer better points value than others, so look for the credit card with the maximum value. 

Your Lifestyle

Think about what you value most in your life and your habits. If you travel often, consider getting a travel rewards credit card, where you build up to getting free flights and travel upgrades. 

If you often shop at certain stores, like Canadian Tire, or Shoppers Drug Mart, consider getting a store credit card, as it can save you a lot of money in the long run. 

It all depends on your lifestyle and what you spend the most money on. 

Welcome Bonus

Most credit cards offer an enticing welcome bonus, where you can earn a lot of extra points or cash back in the first few months of card membership. Take a look at the welcome bonuses for all the credit cards you are considering, and choose the one that works for you best. 

Some credit cards require you to spend a lot of money to get the welcome bonus, while others have short time frames for spending the money. 

Fees

Watch out for credit card fees, like the annual fee, late fees, and other hidden fees that may only be written in the fine print. Some credit cards are free to use, while others have annual fees that can be upwards of $799 (for the Amex Platinum!). 

While no-annual-fee credit cards are great for saving money, the higher-tier cards with fees generally have higher earning rates and more benefits. 

Other Benefits

Some credit cards offer other benefits, like travel insurance, mobile device insurance, shopping coverage, annual vouchers, and more. If you value these additional benefits and see yourself using them, go for a higher-tier credit card. 

If you don’t want to choose between a cashback or rewards credit card, you can get both. There’s no rule saying you can’t have more than one credit card, so why not sign up for both and reap the benefits? 

Just make sure to space out your applications to every three to six months to avoid lowering your credit score. 

Are you earning the maximum rewards on your credit card? Probably not. If you’re renting in Canada, use Chexy to pay rent with your credit card and earn elevated rewards – especially if you have a credit card that earns up to 4% back in recurring payments! 

With Chexy, you can also report rent payments to build your credit score and be on your way to getting approved for higher-tier rewards credit cards. 

Get started with Chexy today. 

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FAQs

Do Amex points expire? 

American Express Membership Rewards Points do not expire. You can redeem them, as long as your account is active and in good standing. 

What is the value of Aeroplan points?

On average, Aeroplan points are valued at 2.1 cents each when used on travel. You can view the flight reward chart here. 

What is the BMO Rewards points value? 

You generally earn 3 points for every $1 spent. For booking travel, $1 = 150 BMO Rewards points, or $0.0067 each point. 

How many credit cards should I have?

According to Equifax, it’s generally recommended to have two to three active credit accounts open at one time. Having more than three can make it difficult to keep track of due dates and payments.