A Guide to the Best Cash Back Credit Cards in Canada

Cash back earned is usually paid out as:

• A credit on your credit card statement
• A cheque
• Deposited directly into your bank account 

Some cash back cards may be linked to the issuer’s rewards program. This allows cardholders to convert their cash back into points. Commonly, points can be used towards:

• Travel
• Merchandise
• Gift cards

One of the most appealing benefits of a cash back credit card is that you can spend the cash you earn on almost anything.   

Not All Cash Back Credit Cards in Canada Are the Same

Cash back credit cards in Canada fall into different categories. How they are categorized depends on the amount of cash back they offer for different purchases.

Three of the most common cash back credit card categories include:

1. Bonus Category Cards - this is the most popular type of cash back credit card in Canada. This type of card offers more cash back on certain purchases than others. The purchase categories that earn more cash back are known as bonus categories. Bonus categories typically include groceries, gas and recurring bill payments. Picking a cash back card with a bonus category that aligns with your most frequent purchases will earn you the highest cash back rewards.
2. Flat Rate Cards - this type of card provides the same amount of cash back on all purchases. Flat rate cash back credit cards are simple to understand and great for everyday shoppers.
3. Flexible Bonus Category Cards - this type of card allows the cardholder to choose which purchase categories they would like to earn more cash back on. This type of card can be extremely beneficial, as it allows you to choose bonus categories based on your personal spending habits. As a result, you can earn more cash back. Currently, there are not many cards like this available in Canada. 

To choose the best cash back credit card in Canada, consider your spending habits. Then, select a card that will offer you the best value.

For example, if you drive hundreds of kilometres for work every month and spend a lot on gas, you’ll want a card that pays a high percentage of cash back on gas. 

One common tactic among cash back cardholders is to have multiple cash back credit cards. This way, they can use the card that provides the most cash back for each purchase.

What Makes a Great Cash Back Credit Card?

To determine the best cash back credit cards in Canada, we examine several features including: 

• Percentage of cash back offered
• Cash back categories
• Cash back bonuses
• Cash back limits
• How cash back can be redeemed
• Annual fees
• Annual income requirements
• Interest rates
• Additional card benefits and perks
• Terms and conditions

Percent Cash Back 

Each cash back credit card will offer different percentages of cash back on different types of purchases.

For example, one card may offer:

• 3% cash back on gas and groceries
• 2% cash back on recurring bills
• 1% cash back on all other purchases 

Cash back percentages can range anywhere from 0.5% to over 10%. 

To choose the best cash back credit card, consider which offers the:

• Highest cash back percentages
• Most cash back on your frequent purchases

Keep in mind - cash back percentages and categories may be changed from time to time by the card issuer. Stay updated on these changes so you can ensure your card provides the most cash back based on your spending habits.

Cash Back Categories

Cash back credit cards offer different cash back categories. 

The most common cash back categories in Canada include:

• Groceries
• Gas
• Transportation 
• Recurring bill payments
• Dining

The best cash back credit cards in Canada will offer numerous cash back categories. 

Be sure to choose a credit card that offers cash back categories that align with your common purchases.

Cash Back Bonuses

Cash back bonuses are often used by credit card issuers as a promotional tool. 

Typically, these signup bonuses will offer a higher cash back percentage for a certain period. This period is often 3 or 6 months but may vary by card. 

For example, as a bonus when signing up, your new cash back credit card might offer 10% cash back on all purchases. However, this high rate will be limited to just a few months.

When the bonus period ends, this cash back percentage will be reduced considerably. 

Pay attention to the fine print. Some credit cards will also put a limit on the amount of cash back that can be earned during a bonus period.

For example, you may receive 10% cash back for three months but with a limit of $200. 

If you spent $2,000 in three months you would reach this limit. For some people, the limit might be reached very quickly. Therefore, the bonus may not be as beneficial as it appears. However, this will depend on your spending habits.

Cash Back Limits

You might also see limits placed on the monthly or yearly cash back you can earn in general.

For instance, a credit card may offer 3% cash back on gas purchases. However, it might have a cash back limit of $100 per month. For those who spend a lot on gas (have multiple vehicles, or use the card for a fleet), this cap will be easily met. 

When comparing cards, look for cash back credit cards that have no limits (or high limits). Although monthly and yearly cash back limits may not affect you, it’s always good to know about any limitations that a card may have. 

Look for these restrictions in the terms and conditions.

Redeeming Cash Back

Different cards have different rules when it comes to redeeming cash back. 

Some cards will pay out cash back earnings monthly and others annually. As well, different cash back credit cards will offer different forms of payment. 

Be sure that the card you choose offers a redemption option that works for you.

Please Note: if you choose to redeem your cash back as a credit on your credit card, you may be required to have a minimum amount before it can be used. Cash back credits cannot be applied to your minimum monthly payment.

Annual Fees

Some cash back credit cards have an annual fee.

The benefit - these cards often offer a higher cash back percentage than cards with no fee.

In some cases, the annual fee is waived in the first year as part of a signup bonus. Some financial institutions will also waive this yearly fee if a certain balance is maintained in your bank account.

Before choosing a cash back card that has an annual fee, be sure the cash back rewards will outweigh the cost of the card.

Annual Income Requirements

Cash back cards may have a personal or household annual income requirement. 

Income requirements vary significantly. Some cards may request an annual income of only $12,000 while others will require $100,000 per year or more. 

The higher the required income, the more perks the card will come with. For example:

• Faster approval times
• Higher credit limits

Even if a cash back credit card doesn’t have an income requirement, the card issuer will ask you how much you earn per year during the application process. This is because, in Canada, issuers can only legally lend money to someone if they are confident that they can make their payments.

Interest Rates

All cash back credit cards charge interest on unpaid balances. However, the rate that they charge will differ. These rates are comparable to most other credit cards in Canada.

Choose a card that offers the lowest interest rate if you intend to hold a balance on your card or anticipate withdrawing cash advances.

Additional Benefits and Perks

Cash back cards can also come with other benefits and perks. 

Each card will offer something slightly different. Some of the most common additional benefits include:

• Extended warranties
• Travel benefits
• Automotive benefits
• Discounts, etc.

Terms and Conditions

Also known as “the fine print”, it’s always important to read the terms and conditions of a cash back credit card. 

You will find a lot of information in the fine print, including:

• Interest rates
• Payment terms
• Cash back percentages
• Purchase categories
• Cash back limits
• When cash back can be redeemed
• How cash back can be redeemed
• All other credit card details