Cash Back vs. Rewards Points: Which Is Worth More?
Whether you’re a newbie or a credit card connoisseur, one of the common questions that plague those looking for new plastic is “should I go with a cash back or a rewards credit card?” Certainly, each card type has its own pros and cons, so how do you choose between the two? A cash back card can offer a straightforward, quick financial return; but a rewards card could net you potentially better goodies, like a free trip or hotel stay. Decisions, decisions!
It’s easy to be seduced by a big sign-up offer or a high earn rate, but to ensure you get the match that will maximize your earnings, try to go beneath the surface and consider the key factors we examine below.
| Cash Back | Rewards | |
|---|---|---|
| Sign-Up Bonus | Typically top out at $200 or so | Can be the equivalent of $300 or more |
| Return on Regular Spending | Evenly matched | Evenly matched |
| Value-Added Features | Features are usually less valuable compared to rewards cards at a similar annual fee level | Value of features can be huge, particularly for upper-tier cards |
| Ease of Use | Very low maintenance | Labyrinth of different transfer rules and redemption rates can be a headache |
| Annual Fee | Evenly Matched | Evenly Matched |
In This Article:
Sign-Up Bonus
You can’t really beat the quick budget boost of netting hundreds of dollars’ worth of extra cash or rewards just by signing up for a card and spending the required minimum amount in the time allotted. When comparing miles vs cash back credit cards, miles/rewards cards usually have the most generous welcome bonuses. Cash back introductory offers commonly top out at a couple hundred dollars or so, whereas rewards cards frequently follow a “go big or go home” game plan to attract new customers with offers worth $300 or more. Here’s a comparison between two of the biggest welcome bonus offers in Canada at the moment:
TD Cash Back Visa Infinite* Card
– Standard Purchase APR: 20.99%
– Balance Transfer APR: 22.99%
– Cash Advance APR: 22.99%
– Credit score required: Good-Excellent
– Min personal income required: $60,000
– Annual fees: $139 (first year Annual Fee Rebate)†
TD’s Cash Back Visa Infinite* Card is presently offering a lucrative introductory cash back rate for New Cardholders: Apply online by May 28, 2023 and earn 10% Cash Back on all Purchases for the first 3 months† up to a total spend of $2,000. After your first $2,000 in Purchases, Gas Purchases, Grocery Purchases and Pre-Authorized Payments will continue to earn 6% up to a total spend of $3,500 for the first 3 months. Plus, no Annual Fee† for the first year for the Primary and Additional Cardholders. To receive the first-year annual fee rebate, you must activate your Card and make your first Purchase on the Account within the first 3 months after Account opening.
In the cash back category this is a market-leading rate that deserves attention, but it still can’t outshine many of the intro offers for rewards cards on the market now. After the introductory period ends, cardholders get a regular cash back rate of 3% on all recurring bill payments and eligible gas and grocery transactions†, and 1% on all other qualifying transactions†.
This offer is not available for residents of Quebec. For Quebec residents, please click here.
†Terms and conditions apply.
TD First Class Travel® Visa Infinite* Card
– Standard Purchase APR: 20.99%
– Balance Transfer APR: 22.99%
– Cash Advance APR: 22.99%
– Credit score required: Good–Excellent
– Minimum Income: $60,000 individual or $100,000 household
New TD First Class Travel® Visa Infinite* cardholders are eligible to earn up to a staggering $1,000 in value† including up to 145,000 TD Rewards Points, and get a full Annual Fee Rebate† for the Primary and 1st Additional Cardholder† for the first year and additional travel benefits. Must apply online by May 28, 2023.
- Earn a welcome Bonus of 20,000 TD Rewards Points when you make your first Purchase with your Card†
- Earn 115,000 TD Rewards Points when you spend $5,000 within 180 days of Account opening†
- Earn a Birthday Bonus of up to 10,000 TD Rewards Points†
- Get an annual TD Travel Credit† of $100 when you book at Expedia® For TD
To receive the first-year annual fee rebate, you must activate your Card and make your first Purchase on the Account within the first 3 months after Account opening and you must add your Additional Cardholders by May 29, 2023.
Just remember: whether for a cash back or rewards credit card the largest introductory offer in the world will be worthless if you can’t fulfill your side of the bargain and make the required minimum spend. In this case the maximum value of the sign-up bonus offered by the TD First Class Travel® Visa Infinite* is superior to that offered by the TD Cash Back Visa Infinite* card, but only if the cardholder of the former can clear its rather high spending hurdles.
This offer is not available for residents of Quebec. For Quebec residents, please click here.
†Terms and conditions apply.
You can compare these to some competing welcome offers by checking out our list of the best credit card sign-up bonuses in Canada.
Return on Regular Spending
In the battle between rewards points vs cash back there is no clear winner for the best regular earn rates. Since both types of cards can feature accelerated earn categories, you need to assess where exactly you spend your money to figure out which card will be the biggest earner for you. This is clear when we compare two top ranking credit cards like Amex’s Cobalt and the Tangerine Money-Back Credit Card.
American Express Cobalt™ Credit Card
– Minimum Credit Score: Fair-Good
– Minimum Income: N/A
– Age: Age of majority in province/territory
– Residency: Canadian resident
The Amex Cobalt is a “lifestyle” rewards card that offers some of the most elevated earn rates possible for people that really love food and travel. Cardholders get:
- 5 Amex Membership Rewards points per $1 spent on Canadian restaurants, grocery stores, and food delivery services
- 3 reward points per $1 spent on streaming services in Canada
- 2 reward points per $1 spent on eligible travel and transit-related expenses in Canada, like airfare, hotels, ground transit, and gas.
- 1 rewards point per $1 spent on anything else
Tangerine Money-Back Credit Card
– Minimum Credit Score: Fair-Good
– Minimum Income: $12,000
– Age: 18+/Age of majority
– Residency: Canadian Citizen/Permanent Resident
– Other: No bankruptcy for the past 7 years
What makes the Tangerine Money-Back Credit Card so valuable is that it not only has no annual fee but also has the most flexible choice of accelerated earn categories of any card on the market. It’s the perfect shopping companion for those whose primary expenses don’t fall into common cash back categories, as cardholders can choose two of the following 10 spending categories that will earn 2% cash back:
- Grocery
- Restaurants
- Gas
- Recurring Bills
- Drug stores
- Hotel-Motel
- Furniture
- Home improvement
- Entertainment
- Public transit and parking
Cardholders can even opt to get a third 2% cash back category as long as they deposit their earnings into their Tangerine savings account.
Apply by May 2, 2023 and get an extra 10% cash back in the first two months, valid on up to $1,000 in purchases for a maximum $100 in cash back.* That's on top of the usual 2% in your 2-3 selected categories and 0.5% on everything else.*Terms and Conditions apply
Check out our respective lists of the best rewards cards and the best cash back cards in Canada to find out which other cards offer particularly high earn rates in the purchase categories where you spend the most.
Value-Added Features
Most basic cash back or rewards cards include purchase security and extended warranty, with things like insurance and concierge service commonly offered among higher-end cards.
The key main difference between perks offered by miles vs cash back cards manifests in premium travel rewards cards. Travel cards tend to kick the value-added features up a notch: in an effort to win the loyalty of big-spending jet setters, the best travel cards of the lot offer particularly comphrehensive insurance packages and/or free airport lounge access. You can see what I mean by comparing the features offered by a travel rewards and cash back credit card, both from the same issuer and with comparable annual fees.
Scotiabank Passport™ Visa Infinite* Card
– Minimum Credit Score: Good-Excellent
– Minimum Income: $60,000 individual or $100,000 household
– Age: Age of majority in your province or territory
– Residency: Canadian citizen or permanent resident
– Other: No bankruptcies in the past seven years
The lineup of features on this frequent flier favourite is outstanding and could save globetrotters hundreds to several thousands of dollars on common flight expenses. To start off with, the Scotiabank Passport™ Visa Infinite* Card offers a far-reaching insurance package that includes:
- Hotel burglary: If you charge a hotel or motel stay anywhere in North America to your Scotiabank Passport Visa Infinite card, you, your spouse and dependent children are eligible for coverage against theft of personal property from your room, up to a maximum of $1,000.
- Baggage lost/delayed: If you or eligible companions on the same trip lose your bags or if your bags are stolen, you’ll all be covered up to a combined max of $1,000 to replace essential items. If your/your eligible companions’ bags are delayed for four or more hours, you’ll also net up to a maximum of $1,000.
- Travel medical insurance: A vital feature for those who travel often, the Scotiabank Passport™ Visa Infinite* Card covers you, your spouse and dependent children for up to $2 million toward emergency medical coverage for up to 25 days. If you are 65 years of age or over, you’ll be covered for up to 3 days. This may not sound like much, but most credit cards in Canada don’t offer any coverage at all for those 65 or over.
Travellers also save because the card doesn’t charge foreign transaction fees and airports will be much more bearable with the card’s complimentary six free annual Priority Pass™ airport lounge visits. There’s no cash back card that offers those kinds of perks.
Scotia Momentum® Visa Infinite* Card
– Minimum Credit Score: Good-Excellent
– Minimum Income: $60,000
– Age: 18+/Age of majority in province
– Residency: Canadian Citizen/Permanent Resident
For a cash back card the Scotiabank Momentum® Visa Infinite* Card offers some impressive value-added features, such as Visa Infinite privileges like hotel upgrades, 24/7 concierge access and unique member-only dining and wine experiences. The most attractive extra is its $1,000 mobile device insurance—and it’s one of the few cards in the country to offer this (Scotiabank Passport™ Visa Infinite* Card doesn’t have this feature). But while that insurance bonus is wonderful, you can see by comparing it with the Scotiabank Passport™ Visa Infinite* Card that its other insurance offerings aren’t as outstanding:
- Hotel burglary: Unlike the Scotiabank Passport™ Visa Infinite* Card, the Momentum® Visa Infinite* Card doesn’t feature hotel burglary insurance.
- Baggage lost/delayed: The coverage is the same as the Scotiabank Passport™ Visa Infinite* Card, but the maximum reimbursement amount for each circumstance is $500 (rather than $1000)
- Travel medical insurance: The Scotiabank Momentum® Visa Infinite* Card offers less maximum medical insurance than the Passport (you, your spouse and dependent children are covered for up to $1 million in emergency medical expenses), and coverage only lasts for up to 15 days if you’re under age 65. There’s no coverage for those 65 years of age or over.
Ease of Use
Cash back credit cards throttle rewards cards when it comes to ease of use. With a cash back card you usually don’t have to worry about what time of year to redeem points, minimum point redemption limits, whether or not your points/miles are transferrable or expire, and the real-world value of your points (check out our Loyalty Points Bible for an explanation about redemption values). Take a look at these two top cards to see which you think would be easier to manage:
Scotiabank Gold American Express® Card
– Minimum Credit Score: Good-Excellent
– Minimum Income: $12,000
– Age: Age of majority in your province or territory
– Residency: Canadian citizen or permanent resident
– Other: No bankruptcies in the past seven years
To highlight just how much more complicated rewards redemption can be, we’ll look at the Scotiabank Gold American Express Card. This card is hands-down one of the easiest and most transparent rewards programs to use. Rewards act almost like cash with one of its Scene+ points equaling $.01—but only if you put your points towards travel. If you don’t use your points for travel expenses, however, the reward system becomes much more complicated and loses value (as is the case with many a travel rewards card).
For example, you earn 5 points per/$1 spent on a variety of categories, including groceries. So, if you spend $500 on groceries in a month you get 2500 points, equivalent to $25 that you can put toward any travel spending (like baggage fees, plane ticket, seat fees, etc.) on your Scotia credit card statement within a year of the transaction date. Of course, your travel points are not automatically redeemed for you, unlike with most cash back cards where the cash back points are applied to your statement every month or once a year without any effort on your part.
Point redemption gets more complicated and less valuable if you want to redeem Scene+ points on things like a statement credit or a gift card/donation. In these cases, point value goes down from $.01 (travel) to $.0067 (statement credit) and $.0074 (gift cards/donations). If this all seems too complicated (and remember Scene+ are among the easiest to redeem) then a rewards card may not be for you.
The SimplyCash Preferred Card from American Express
– Minimum Credit Score: Fair-Good
– Minimum Income: $
– Age: 18+/Age of majority
– Residency: Canadian Resident
With the SimplyCash Preferred Card from American Express you get 10% cash back for the first four months (up to $400 in cash back), then 2% cash back afterward on every single purchase you put on your card. After the promotional period ends there are no spending caps or categories to worry about; all of your spending has the same earn rate all the time. There is no rewards card that can compete with that kind of simplicity.
Annual Fee
Overall, the annual fees for cash back and rewards cards are comparable, ranging from $0 for basic no-frills cards, to $120 on average for higher-end cards, to $500+ for truly premium cards.
The basic idea is that the higher your annual fee, the more earn power and extra goodies you get. For example, the American Express Platinum card features a hefty annual fee of $699, but you get an outstanding bonus offer and an amazing stack of airport, airline, entertainment insurance and other benefits. But aside from the Amex Platinum and a few other super deluxe cards, rewards cards and cash back cards have more or less the same range of annual fees.
Is One Better Than the Other?
No single card can meet the needs of all consumers, and whether cash back or rewards oriented, different cards emphasize different types of spending and consumer needs. Rather than trying to determine categorically if a cash back or rewards card will be the best fit for you, you need to look at each card individually to find the best match for your lifestyle.
* This post was not sponsored. The views and opinions expressed in this review are purely my own.
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