Rewards Cards Canada - Your Guide To The Best Rewards

4 Dumb Reasons For Not Getting A Rewards Credit Card

I use a rewards credit card for practically all my spending to earn cash back and travel rewards. It’s a fast, secure and convenient way to pay for my daily transactions – big or small.

So that’s why I can’t understand when some people scoff at the idea of using a credit card for their everyday spending.

Here are 4 dumb reasons people use for not getting a rewards credit card:

Rewards Credit Cards Have Higher Interest Rates

Indeed, most of the top rewards cards charge interest of 19% or more (as do many standard, non-rewards credit cards). But if you carry a balance from month-to-month then a rewards credit card just isn’t a good idea.

The interest rate only matters when you don’t pay off your balance in full every month. Who cares about the interest rate? You’ll never pay a dime of interest when you diligently pay off your balance each month.

Once you receive your credit card statement, just set-up an automatic withdrawal from your bank account each month and you’ll never miss a payment.

You Need Too Many Points To Make It Worthwhile

Travel and loyalty programs have been getting a lot of backlash from consumers lately as they devalue points, set expiry dates for your points and impose restrictions on how you redeem your points.

I understand the frustration, which is why I started using a cash back credit card. With a cash back card, you know exactly what you’ll get from your rewards program.

I use a combination of the Scotia Momentum Visa Infinite and the Capital One Aspire Cash World MasterCard. Capital One let’s you redeem your points anytime for a statement credit or a cheque. With the Scotia card, your cash back builds up until November and then gets applied to your account as a statement credit.

This combination can give you $625 cash back per year when you spend $2,000 per month. That’s a 2.6% return on your spending.

How much do you get back when you use debit or cash? I thought so.

Rewards Cards Encourage You To Spend More

The theory goes that when you use cash, once it’s gone there’s nothing left for you to spend. Some say this approach forces you to budget and control your spending – that you’ll feel a twinge of pain whenever you remove cash from your wallet.

When you use a credit card, you’ll go crazy spending because you don’t actually see the money come out of your wallet (or your bank account, like with a debit card).

That’s fine, I get it. But that approach doesn’t work for me. Whenever I carry cash, it disappears faster than the Leafs three-goal lead in the 3rd period.

I’ll buy a magazine or a chocolate bar, a coffee or a beer. Once that $20 bill is broken, the toonies and loonies end up in my daughter’s piggy bank, or paying for parking.

The truth is that a credit card is great for budgeting because you’ll get an itemized (and sometimes categorized) list of all your spending every month. Go back regularly and compare your spending to your budget to keep yourself accountable.

As far as I’m concerned, proper spending habits begin with setting and sticking to a budget.

Cash, debit and credit are just methods of payment. Which one of these payment methods actually gives you money back?

Premium Rewards Cards Cost Retailers More

The Canadian Federation of Independent Business wants consumers to pay with cash or debit to helps keep prices low. That’s because Visa and MasterCard ding retailers with an interchange fee every time you pay with a credit card.

The fees range from 1.65% of the transaction cost with a standard credit card, up to 2.71% of the transaction cost with a premium “high-spend” card like the World or World Elite MasterCard.

Here’s a chart that shows the merchant fees for each credit card issued in Canada.

The CFIB says retailers should be able to pass along those charges directly to consumers. While that may happen sometime down the road, there’s no evidence to suggest that retailers will pass along the savings by lowering prices.

Australia was successful in implementing a credit card surcharge back in 2003, but many retailers treat it as another profit centre as opposed to lowering prices for consumers.

The bottom line is that retailers will always find a way to pass on their costs to consumers in the form of higher prices.

Can you honestly see any retailers discriminating against you because of your chosen method of payment? Who would refuse a sale in this tough, competitive economic climate because they’ll get charged an extra 0.5%? Talk about business suicide!

When I go to the grocery store and pay with my Scotia Momentum Visa Infinite card, I’ll get 4% cash back while the store pays 2.15% on the transaction. A $200 purchase gives me $8 back. If I used debit or cash, the retailer saves a few bucks, but I’ll get nothing back.

Why not play the game and, as a consumer, come out on the winning side for once?

Final thoughts

It took me a while to ‘get’ what rewards credit cards were all about. But once I started using them to my advantage I started maximizing my cash back and loyalty points.

Rather than spending $14 per month for unlimited debits, I’ve been earning $50 per month or more with my cash back credit cards.

For those who say it isn’t worthwhile, think about how much time and effort you spend looking for the best interest rate on a savings account and how much interest you’ll actually earn in a year.

Put $10,000 in a savings account at 2% interest and you’ll earn just $200 per year.

So forget all those dumb reasons you’ve heard for not getting a rewards credit card and start putting some cash back in your pocket.

Reader Question: Which Cash Back Credit Cards Offer The Most Value?

I received an email from reader ‘Ted’ in response to a recent column I wrote in the Toronto Star about cash back credit cards:

I just read your article “8 more no-fee cash back credit cards compared“, and would like to ask you two questions concerning the MBNA Smart Cash card (which is the card I currently use):

But first – before TD purchased MBNA, the cash back awards were higher and fairer. Since they took over they’ve reduced the true amount a customer will now receive.

BEFORE

after the first 6 months: 3% back on ALL grocery and gas purchases and 1% back on all other purchases – with purchase totals being carried forward from one month to another

AFTER

following the first 6 months: 2% back on grocery and gas purchases provided a minimum amount is spent each month (with a ceiling imposed on how much you will be given cash back on/per month). All other items provide 1% cash back with a ceiling on spending – and no balance carry-overs permitted.

Related: Changes To MBNA Smart Cash Rewards Explained

QUESTIONS

1) When you did your research on these 8 cash back credit cards, did you take into account the new limitations TD put into place before you concluded that it provided more cash back than the other cards?

2) Did your research show any restrictions/limitations with the other cards you’ve mentioned in your article and if so what are they??

As a Canadian, and a Senior Citizen, I’m offended that the TD would take away the benefits I enjoyed/needed when MBNA was owned by The Bank of America, who, by the way, still offer the same cash back values they offered with their MBNA card – but now they offer it, in the U.S. of A, via their Visa card.

If I can find a card that would provide me with as much true value (or more), than my MBNA card currently offers, I’d switch in a heart-beat.

Thank you for your time and input.

Cash Back Credit Cards: Which One Should You Use?

Hi Ted, thanks for your email. I used the Smart Cash card for two years before TD decided to reduce the amount of cash back you could earn (last December).

From there I researched the top cash back credit cards and decided to use two cards to maximize the amount of cash back I could earn. So now I use the Scotia Momentum Visa Infinite for groceries and gas (4% cash back), and for pharmacy and recurring bill payments (2% cash back).

I also use the Capital One Aspire Cash World MasterCard for everything else (because you get 1.5% back on all your spending, instead of the 1% back that Scotia pays on the ‘other’ categories).

I’ve written about this in more detail here – Top Cash Back Credit Cards In Canada

The article you’re referring to in The Star stemmed from some readers complaining that they couldn’t get the Visa Infinite or the World MasterCard due to the higher income requirements ($60k personal, $100k household).

So I decided to list and compare other options for people who earn less than $60k but who still want to get a decent return from their cash back card.

To answer your questions:

1. Yes, I used the current Smart Cash rewards structure. Believe it or not, even with the recent changes it’s still superior to the other basic cash back credit cards on the market.

2. There are limits/restrictions on some of the bank cards but they didn’t factor in when I compared them based on spending $1,000/month. For example, RBC’s Cash Back MasterCard gives you 2% back on groceries up to a maximum of $6,000 per year. So if you spend more than $500 a month on groceries you would reach that threshold.

The Bottom Line:

The Scotia Momentum Visa Infinite and Capital One Aspire Cash World MasterCard, when used together like I’ve described above, will give you the most cash back.

The caveat being that you’ll need to show proof of at least $60k annual income, or $100k in household income to qualify.

The Capital One Aspire Cash World MasterCard is a no-fee cash back card and you’ll also get $100 bonus with your first purchase.

It’s also worth noting that the Scotia card comes with an annual fee of $99. That’s partially offset in the first year by a $50 statement credit after your first purchase.

Just keep that in mind because you’ll want to make sure your annual spending will give you enough cash back to justify the annual fee, and that you’ll actually net more cash back than you would using a no-fee card like MBNA’s Smart Cash Platinum.

All that said; if you don’t meet the minimum income threshold to qualify for the premium reward credit cards unfortunately you’re out of luck.

What I’d do in this case is continue to use the Smart Cash card for groceries and gas (up to $400 a month) and then apply for the Capital One Aspire Cash Platinum card (that I referred to in The Star article) and use it for all your other monthly purchases.

With the Capital One Aspire Cash Platinum card, you’ll get 1% back on all your spending with no caps and no restrictions. Plus you’ll get a 25% cash back bonus at the end of the year, which means you’ll earn 1.25% back.