Best Cash Back Credit Card in Canada

Cash back is a type of rewards program offered by certain credit cards.

You earn cash back on a percentage of your card purchases, which you can claim as a credit on your monthly statement and in some cases use to redeem other rewards.

The amount of cash back you can earn depends on the type of credit card you use and its rewards program.

How Do Cash Back Credit Cards Work?

You earn cash back rewards on each eligible purchase you make with a cash back card.

Usually, these cards offer a rate from 1% to 5%.

However, the amount can vary based on the purchase’s spending category (groceries, gas, subscriptions, etc.).

For example, suppose your total purchases amount to $1,500 during a single month, and your cash back rate is 2%.

In that case, you’ll receive a cash back credit of $30 for that period.

As you collect cash back, it will appear on your monthly credit card statement.

Alternatively, you can view your progress through your online banking account.

Generally, your cash back rewards never expire if you keep your account in good standing (i.e., active with no missed payments).

You can redeem your cash back rewards either at your discretion or at specific time intervals dictated by your card issuer (such as once a year).

Cash back credit cards offer straightforward, transparent, and convenient rewards programs.

They’re suitable for those who value simplicity and prefer earning cash rebates on their everyday spending rather than travel or other big-ticket items.

Don’t Forget

You’ll need to have a credit score between 650 and 750 to be eligible for the most lucrative cash back cards, and top-tier cards also ask for a minimum income, such as the MBNA Rewards World Elite Mastercard.

Earning Cash Back on Credit Cards

There are essentially two ways card issuers structure their cash back rewards programs: flat-rate and bonus/tiered rate.

Flat Rate

With a flat rate card, you earn the same cash back rate on every purchase you make, regardless of the spending category.

This structure facilitates easy tracking of cash back.

Most cards impose an earnings cap on the amount of cash back that you can earn monthly or annually.

Others allow you to collect unlimited cash back but reduce your earn rate once you exceed a specific spending threshold.

For example, with the Brim World Elite Mastercard, you’ll earn a flat rate of 2% on every purchase, up to $25,000 in annual spending.

For every dollar you spend after that, you’ll earn a 1% rate.

Bonus/Tiered rate

With bonus rate cards, you’ll generally earn a base rate on all purchases, plus higher rates on items in certain spending categories.

Much like cash back rates that operate under a flat-rate model, you’ll be subject to annual or monthly spending thresholds in each category.

For example, you might be restricted to collecting $1,000 in points annually from your grocery shopping under a 4% rate.

Thus, once you reach $25,000 in grocery spending during a particular year, you won’t earn any more cash back in that category until the following year, when your limit resets.

An example of a cash back card that utilizes the bonus rate model is the BMO Cash Back World Elite Mastercard. By using this card, you’d earn:

  • 5% cash back on groceries, up to $500 per month and 1% after that
  • 4% cash back on transit, up to $300 per month and 1% after that
  • 3% cash back on gas, up to $300 per month and 1% after that
  • 2% cash back on recurring bill payments, up to $500 per month and 1% after that
  • 1% unlimited cash back on all other purchases

Did You Know

Some cash back cards utilize a bonus/tiered rate model wherein the categories that qualify for bonus rates rotate periodically (usually every quarter) rather than remaining fixed.

Redeeming Cash Back Earned Through Credit Cards

Let’s say you’ve amassed a considerable amount of cash back on your credit card.

How do you go about redeeming it for actual cash?

Simply follow these three steps:

1. Determine when you can convert your cash back

Each card issuer has its policy that determines when you can redeem your cash back and at what frequency.

Some allow you to request redemption at any time, provided you’ve reached a minimum cash back balance.

For example, if you use an RBC card, you can convert your points at any time once you’ve earned at least $25 worth of cash back.

Others, like American Express, pay out cash back rewards annually.

Ensure you familiarize yourself with your card’s policy to know when you’re able to covert your cash back.

2. Decide how you’d like to redeem your cash back.

Typically, you can request a statement credit, a cheque, or have the funds deposited directly into your bank account.

You might also be able to exchange your cash back for a gift card, apply it to an item you purchase at participating retailer, redeem it for merchandise, or donate it to charity.

However, some card issuers restrict you to only one option, such as a monthly statement credit.

3. Request to redeem your cash back

Redeeming your cash back rewards is straightforward, though the procedure varies depending on which financial institution maintains your account.

With RBC, you’ll have to make a phone call to customer service; otherwise, your cash back balance will be credited to your account every January.

If you have a TD card, you can initiate the redemption online through the TD Rewards online portal or EasyWeb, the institution’s online banking service.

Guy checking his cash back credit card balance

Frequently Asked Questions

  • How do you calculate cash back on a credit card?
  • Are cash back cards worth it?

Mark Gregorski

Mark is passionate about educating people on how the financial markets work and providing tips to help them better manage their money. Mark holds a bachelor’s degree in finance from the Northern Alberta Institute of Technology and has more than a decade of experience as an accountant.

Outside of writing and finance, he enjoys playing poker, going to the gym, composing music, and learning about digital marketing.