The Motley Fool Canada’s personal finance content is reader-supported: we may earn a commission from offers on this page. It’s how we make money. But our editorial integrity ensures our experts’ opinions aren’t influenced by compensation.

The Motley Fool Canada’s top cash back credit card picks at a glance:

Credit card	Cash back earn rate	Rating
SimplyCash ™ Preferred Card from American Express	2% cash back on all spending (after your Welcome Rate ends)
Scotia Momentum Visa Infinite Card	4% at grocery stores, recurring bill payments, and subscription purchases 2% on gas and daily transit 1% on everything else
Tangerine Money-Back Credit Card	2% Money-Back Rewards in two categories of choice 0.5% Money-Back Rewards on everything else
CIBC Dividend Visa Infinite Card	4% on gas and groceries 2% on transportation, dining, and recurring payments 1% on everything else
Rogers World Elite Mastercard	1.5% on regular purchases 3% on eligible purchases made in U.S. dollars (note 2.5% foreign transaction fee)
TD Cash Back Visa Infinite Card	3% on eligible grocery, gas, and recurring bill payments 1% on all other purchases
SimplyCash ™ Card from American Express	1.25% cash back on all spending (when your Welcome Rate ends)

---

 

What is a cash back card?

A cash back card is pretty much how it sounds: you earn “cash back” for shopping with your credit card. How much you earn depends on your card’s earn rate, usually around 1% to 3%, though some rewards programs will offer you higher rewards for specific spending categories.

What are the types of cash back cards?

Though you have no shortage of cash back credit card options, you can separate them by the structure of their rewards program. In general, you can classify cash back cards as flat-rate, bonus-category, and rotating-categories.

Flat-rate

Flat-rate cards offer one universal earn rate, which is applied to all purchases. For example, if your card has a 2% flat-rate, you’ll earn $2 for every $100 you spend, no matter if it’s on gas, food, or travel.

Flat-rate cards are ideal for Canadians who want one credit card, as you can earn a solid rate no matter where you shop. The downside is you won’t earn bonuses for certain spending categories, which can represent a loss if you spend heavily on certain expenses.

Bonus-category

With bonus-category cards, you’ll typically have a flat-rate that’s applicable to all purchases, along with significantly higher “bonus rates” for certain spending categories. For example a card might offer 3% on gas and groceries, 2% on dining, transportation, and recurring payments, and 1% for everything else.

Occasionally, some bonus-category cards will put a cap on how much bonus you can earn in each category. For example, you may find a cash back card that gives you 5% back on all grocery purchases, which sounds extremely lucrative (it is). But upon reading the terms and conditions you learn you can only earn $1,500 annually in rewards. In this case, after you spend $30,000 on groceries (which will earn you $1,500 in rewards), you’ll stop getting cash back, until the year is up and your card recharges.

Rotating-category

Rotating-category cards work similarly to bonus cards: your card has a flat-rate applied to all purchases along with a significantly higher rate applied to bonus categories.

The difference between the two? Rotating cards change bonus periodically, usually quarterly or yearly. So, for example, you may earn 5% cash back on groceries for the first three months, 5% on dining the next three, and 5% on gas the three months after.

Credit card companies will typically tell you in advance which categories will qualify for bonus rates, either at the beginning of the year or right before the new quarter begins. Though the bonus rates on rotating-category cards are superb — some of the highest around — you’re not guaranteed to get categories on which you spend a great deal.

Similar to bonus-category cards, the bonus categories typically have spending caps after which you’ll longer receive cash back.

How do you get your cash back?

Cash back rewards are one of the most versatile rewards programs out there. Once you’ve accumulated enough cash back, you can typically redeem it for a statement credit, a deposit into your checking account, a check in the mail, or even a gift card.

Keep in mind some cards will have redemption minimums, such as $25. Also if you plan on applying your cash back rewards to your statement balance, you still have to pay the minimum on your account to avoid paying late fees and damaging your credit score.

What credit score do you need to get a cash back card?

While every credit card company differs, you should have at least a good credit score (680 or above) if you want your application to be approved. For some cash back cards, especially those with the highest rewards, you’ll probably need a score in the very good (720 to 779) or excellent (780 or above) range.

How can you pick a cash back card?

1. Pick a cash back card that matches your spending habits

When it comes to cash back cards, you want to choose a card that will earn you the most money. One strategy is to go over your monthly expenses and identify spending categories that outpace the others. Once you’ve identified popular expenses, look for credit cards that will give you the most rewards for those categories.

2. Look for sign-up bonuses

Many credit card companies offer welcome bonuses, which help you earn more rewards for an introductory period. Introductory bonuses can be highly lucrative. For example, a card might have an introductory cash back rate of 10%, which lasts for the first three months, along with waived annual fees.

Though you don’t want the bonus offer to be the only reason you take out a card, it can certainly help you decide between two similar cards.

3. Don’t brush off cash back cards with annual fees

Yes, it may seem counterproductive to pay an annual fee to use a rewards card. But sometimes the higher earn rates and bonuses on cards with annual fees far exceed the cost to use them. Always run the numbers first before you dismiss these cards.

Don’t want to pay an annual fee? No problem. You still have plenty of good choices for cash back cards with no annual fees.

A cash back card might be right for you if…

You don’t carry a monthly balance

When you don’t pay your balance in full by the end of your billing cycle, you’ll pay interest on all unpaid charges. Many cash back cards come with high APR (annual percentage rates), which means the interest on unpaid balances can be particularly harsh.

Depending on the actual APR of your card and the balances you carry, your interest can get so high, it essentially cancels out or surpasses what you earn in rewards. Some cash back cards will come with an introductory period of low APR, which usually lasts a year or more. Once that period ends, your APR will jump to a higher rate, usually between 15% to 25%.

For this reason, cash back cards are best for cardholders who don’t plan to hold a high balance for consecutive billing cycles. Unless you lock into a low APR period, you’ll pay a lot more in interest, making the card’s rewards difficult to justify.

You have a good credit score

For those Canadians with average, fair, or poor credit, you’ll find it difficult, if not impossible, to secure a cash back rewards card. The best option is to build your credit score with a credit card designed for poor credit, then graduate later (after you’ve raised your score) to a more lucrative card.

The rewards outweigh the fees

If your cash back card comes with an annual fee, you first want to ensure you’ll spend enough to make the fee worth it. For example, if your card has a 2% earn rate with $100 annual fee, you’ll want to spend at least $5,000 to break even.

What should you watch out for?

When it comes to cash back cards, it’s easy to get so wrapped up in reward programs and earn rates, you overlook the terms and conditions. So, as you’re reviewing different cards, here are some questions to ask yourself.

Do the rewards expire?

While not all rewards cards have expiration dates, make sure you understand the rules around credit card inactivity, as some rewards will expire if you haven’t used your credit card in a long time.

Does it have quarterly or annual rewards caps?

Some cash back cards will stop earning rewards after you earn a certain amount. For example, you may have a nice 5% cash back on all food purchases, but your bonus could stop after you earn $1,500 back. Typically, these earning caps recharge quarterly or yearly.

Should you avoid cards with rewards caps? Not necessarily. Most of the time, the caps are so high, you won’t reach the maximum anyway. For example, for a card with a $1,500 cap and a 5% earn rate, you’d have to spend $30,000 in order to reach your maximum.

Does it have any redemption limitations?

Look carefully at your rewards program. Do you need to accumulate a minimum before you can cash in your rewards? Some credit card companies will set a minimum, such as $20 or $25, that you have to earn before you can cash in.

Likewise, make sure you understand how you can get your rewards. Most rewards programs are generous with redemptions, but quite a few may offer only one or two methods of cashing in.

Frequently Asked Questions

What is a cash back credit card?    

A cash back credit card is a credit card that gives users cash rewards for all or some portion of their spending on the card. For example, a cash back card might offer 1% cash back on all spending. A user of that card would then get either a credit to their account or a cheque in the mail equal to 1% of all of spending done on that card over a certain period of time.

How do cash back credit cards work?    

Cash back credit cards tend to be the easiest and most straightforward rewards credit card. With a cash back card, you generally get a percentage of all or a portion of your spending on the card returned to you in the form of cash back rewards. For example, you might have a card that offers 1% cash back on all spending. In that case, if you spent $10,000 on that card over the course of a year, the card issuer would either send you a cheque or issue a credit to your account in the amount of $100 (1% of $10,000). In some cases, cash back cards will offer a higher cash back rate on certain categories of spending. For example, you may get 2% cash back on gas and groceries and 0.5% on all spending in other categories.

Are cash back credit cards worth it?    

A cash back credit card can be a great choice. If you are able to use a credit card responsibly — that is, not accumulate debt on the card — then a cash back card is a great way to earn money without having to do anything special. Cash back credit cards are simple rewards programs and usually don’t require much effort on your part, which is a great selling point. On the other hand, if you like optimizing credit card rewards, a cash back credit card may not be as good of a choice. Rewards credit cards that offer points can often be more lucrative than cash back cards, though they require more effort on your part to get the best results.

---

Some offers on The Motley Fool are from our partners — it’s part of how we make money and keep this site going. But does that impact our reviews? Nope. Our commitment is to you. If a product isn’t any good, our review will reflect that, or we won’t list it at all. Also, while we aim to feature the best products available, we do not review every product on the market.