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credit cards | Cashback programs in excess of points

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Maria Gill
Maria Gill
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About a year ago, Matt Brownlow began putting all of his expenses on a Tangerine cashback credit card to get the most out of his rewards program. He pays the balance on his card at the end of each month.

Posted at 1:46 pm

Leah Gulbe
Canadian Press

The 33-year-old mortgage broker, who works at Mission35 Mortgages in Burlington, Ontario, has ditched his former President’s Choice points card in favor of one that offers cash back, so he can use his rewards for rewards.

“If I’m saving for something, I can put the money from the rebates aside. With Tangerine, that’s great because it can be paid into a separate savings account. Last month, I bought a food processor with that money, because I was interested in a particular model,” he explained.

“I also used this money to put into my Questrade (online brokerage) account. I only deposit it when it reaches a certain amount. […] I can put it in an exchange-traded fund and watch the money grow faster. »

Among credit card holders, 78% say they most often use a card that offers some kind of reward, according to a report on digital currency trends in 2021 recently published by Ratehub.ca. Cards with cashback were the most popular (54%), followed by those offering store credit (25%) and travel cards (23%).

“Cashback offers have never been more attractive in Canada than they are now, and there have never been more people looking for cashback credit cards,” said Ratehub.ca General Manager, Daily Banking, Micael Castaldo.

“(It is) attractive for everyday use because you can earn a large amount of cash over time, especially if you use your card regularly to pay for certain items or recurring bills.”

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Mr. Brownlow, who recently spent eight months doing home renovations, has customized spending categories for his Tangerine card to make the most of his purchases of home improvement, furnishings and groceries.

The card offers 2.0% cashback in three denominations of her choice – other options include restaurants, gas and parking – and all other spends earn 0.5% cashback. Refunds are deposited into her Tangerine savings account. Cardholders without a Tangerine bank account get higher cashback in two denominations instead of three, with cashback directly to their credit card account.

‘Very clear’ rate of return

Cashback at other financial institutions follows a variety of models, whether it’s a points system that includes cashback options, or partnerships with specific gas stations or grocery store chains that offer rewards above the baseline.

Castaldo noted that direct cashback rewards increase savings in ways that points cannot.

“You can set it up so that your cash is automatically paid into your savings or checking account and treat it as another savings feature.”

Cashback is also attractive due to its simplicity.

The rate of return achieved is very straightforward compared to some of these points programs which can be complex. This transparency seems to resonate with many people.

Another advantage they have, especially over point cards, is that you get rewards up to the dollar. In comparison, people don’t always use all of their points for other types of reward cards.

“It’s kind of exciting for a lot of people because they don’t end up with this embarrassing number of points they never used at the end of the year,” he noted.

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The downside, compared to other rewards cards, is that those who double their points on the points card usually get more value than the cashback card.

He explained that this happens because the financial institutions that control the value of points assume that users do not spend all of their points.

“(People have) this massive balance of points that they keep on their books every year so they can be more generous knowing that people won’t always use it. On the other hand, with cashback, people always reduce their balance to the last dollar every year. . »

For Canadians looking to sign up for a cashback card, Castaldo recommends always reading the fine print.

He noted that “many credit cards may have attractive welcome offers, but those offers will disappear after six months.”

He adds that the best way to get “a big bang for your money” is to go online and read the details of each card.

Ratehub’s results are based on an online survey of 1,527 Canadians, conducted between August 20 and August 22, 2021, using an online panel from Leger.

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