Alfred Erickson Garcia

If you want to start taking advantage of free cash back and rewards, you’ll want to apply for a cash back credit card as soon as possible. Right now in Canada, there are a multitude of cash back credit cards you can choose from, but it’s important that you understand how they work so you can maximize your cash back and use it to your advantage.

What are Cash Back Credit Cards?

Cash Back Credit Cards are simply what they sound like, they give you cash back for every purchase you make with the card. They give you more freedom since you’re able to spend that cash on anything you want or need, rather than have to be limited to a rewards points system that other credit cards offer. There are so many cash back credit cards in Canada these days, so it’s a no brainer for you to sign up for one today. You definitely want to start taking advantage of all the benefits and rewards cash back cards can offer.

How Do Cash Back Cards Work? Cash Back Credit Cards are structured differently and can either come as Flat Rate or Bonus Category.

Flat Rate cards are straightforward and pay you the same percentage back on whatever purchase you make, whether you use your card on groceries or gas. They won’t put a cap on how much you spend, so the amount of cash back you can earn is limitless. Flat Rate cards are a convenient and easy option for making everyday purchases.

Bonus Category cards will pay you higher rates back on specific categories. So if you typically eat out at restaurants a lot, or maybe like to travel, bonus category cards can be a great option for you. You can search for a card that offers you a higher cash back rate in the category that you spend the most money in. This way you can maximize the amount of cash back you earn.

But since there are so many options out there, take time to do your research and consider the following criteria when making your decision on the best cash back card for you:

  • 1. Annual Fees: A lot of cards will charge an annual fee and this can be a deal breaker for some people. But you may be able to find a card with the same cash back rates but with lower or no annual fees. If you don’t think you’ll use your cash back card a lot or don’t think you can spend that much money, paying a hefty annual fee may just not be worth the rewards the card comes with. You might just end up paying more for the card instead of getting more cash back.

  • 2. Welcome Bonuses: This is another great perk when you sign up for a new credit card. To get you to sign up, a lot of cards will offer you some type of welcome bonus, such as getting a higher cash back rate of 6% on eligible purchases within the first 3 months of signing up. After the welcome offer ends, the card will then pay a lower rate around 1-2%on purchases. Keep this in mind so you can max out your benefits.

  • 3. How You Spend: Depending on what you spend your money on, you can maximize the benefits of a cash back card. Some cash back cards are geared towards world travelers,so they may give you steeper cash back rates for spending on flights or travel. Other cards may be more practical for everyday purchases, such as higher rates for shopping at supermarkets or retail stores. It’s important for you to think about your spending habits and pick a card that will benefit you the most. Not all cards are best suited for everyone.

  • 4. Your Credit Score: In order for banks to trust you and offer you a new line of credit, they will take a look at your credit score to see if you are a reliable borrower. Certain cards with higher cash back rates or more benefits will require a better credit score. Some other cards will also take your personal income into consideration. It’s important to check your credit score regularly and always make sure you pay your bills on time.

  • 5.Annual Interest Rate: It’s easy to slip behind on credit card payments if you’re not careful. Credit Cards will charge high interest rates, typically around 20%, if you start leaving an unpaid balance on the card for too long. When you’re applying for a new card,make sure you consider the annual interest rate since this can drastically affect how much money you might owe.

Because there’s just so many cash back cards out there in Canada, their benefits might all start to sound the same. This is more the reason why you should take your time to compare different cards and understand how cash back cards work. Especially depending on your spending habits, you can easily earn way more cash back with one card over another. Make sure you know your credit score, your annual income, and have a good idea on where you spend the most money. From there, pick a card that’s best suited for you.



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