Everyone likes to feel rewarded, and credit card points programs are always a hot topic. Just like the extreme couponers of yesteryear, rewards chasers go out of their way to collect the most points by using their credit card.
Rewards cards offer travel perks, cash back, and other incentives to enhance your lifestyle, but should be used with control and moderation. Irresponsible credit card spending can get you into debt.
So, which are the best reward credit cards in Canada, and how do you know if they’re worth it? We’ll share suggestions from MoneySense’s best rewards cards Canada 2024 list. And, more importantly, we’ll cover 5 questions to ask yourself before you apply for a rewards points credit card.
5 Questions to Ask Before Applying for a Points Card
The more you spend on a credit card with rewards, the more points you earn to spend on your ultimate goal (anything from a free Starbucks latte to an overseas trip).
But before you run out and apply for any, consider whether you really need them and if you can manage your credit card.
So before we get into the best rewards cards in Canada, ask yourself these questions before you apply for one.
1. Can I pay off my balance each month?
If you’re not able to pay your credit card off each month, the rewards simply aren’t worth it. Consider the following scenario. Most cash-back cards earn you an average of 2% on each purchase made. So, if you spend $500, you’ll earn $10. Now, if you carry that balance over to the next month with an average interest rate of 18%, you’ll incur $15 in interest charges. That’s a $5 loss, which will continue to grow month over month if you don’t pay the balance. The reward isn’t so rewarding now, is it?
Remember to also consider your monthly expenses, existing debt, and income limitations. If you already struggle with minimum payments, adding more to your debt load puts your credit score in jeopardy.
2. Do I really get cashback?
It’s important to remember that even the best rewards credit cards offering cashback may not actually give you cash back. Instead, you can use the points to purchase rewards or gift cards or apply the dollar amount back to your credit card balance. Only some will actually put the money into your bank account, and that’s generally only after you’ve accumulated a certain amount.
3. Does the card have an annual fee?
Check the fine print for an annual fee (with so many cards available today, there’s really no need to be paying a fee). Creditors lure people into applying with appealing rewards. But if you have to pay $80-180 annually to get them? They might cost you more in the long run.
4. Do the rewards have expiration dates?
Some credit card points expire in as few as 18 months, which may not even give you enough time to earn and use them. Some creditors will also take away your rewards for card inactivity, or, even if you miss just one payment. Check the fine print to understand each individual card’s rules.
5. Are there spending caps?
When does 2% beat 5%? When credit cards have a cash-back spending cap. They may advertise a great 5% cash-back rate, but after you hit the limit, the rate drops to a measly 1%. That means that big spenders could be missing out on hundreds of rewards dollars per year. For these individuals, a credit card with a lower but unlimited cash back percentage may be a better deal than a high percentage cash back card with a cap.
Still want to consider a rewards card? We’ll share a few options from MoneySense and Savvy New Canadians below.
Best Reward Credit Cards in Canada 2024
Each year, MoneySense and Savvy New Canadians release their recommendations of the best rewards cards in Canada, noting which are ideal for things like travel rewards, cash back, low fees, hotel perks, or student lifestyle. Here is a sample of those recommendations for rewards cards in Canada based on those roundups, considering price point, perks, accessibility, and overall value:
1. Cash Back: Neo Credit Card
If you’re looking for a standard cash-back credit card that doesn’t break the bank and offers points for restaurants and rideshares, the Neo Credit Card is a great option.
2. Newcomers: Simplii
Simplii Financial caters specifically to newcomers with their zero-fee cash-back credit card, only requiring an annual income of $15,000 to qualify.
3. Travel Points: American Express Green Card
The budget-friendly AmEx Green Card offers travel splurge potential without the regularly high AmEx fees, including 3X the points on travel, transit, and international dining.
4. Retail Perks: PC Mastercard
If you regularly shop at Loblaws, No Frills, or Shoppers Drug Mart, you can reap serious points with the no-fee PC Optimum Mastercard.
5. Students + Travel: CIBC Aeroplan Visa Card for Students
If you’re still in school and want a travel credit card, CIBC’s Aeroplan Visa Card for students doesn’t have any income requirements or annual fees.
Using a Rewards Card Responsibly
Credit card rewards can work for the right person; some people can earn hundreds or thousands of dollars per year and enjoy other perks such as free flights, stays, and meals. However, even the best rewards credit card can cause more harm than good for people already struggling with debt. They can be especially dangerous if you’re prone to impulse purchases, as you may overspend just to get points—spending more than the points are actually worth.
Contact Credit Canada for Credit Card Debt Help
The best rewards cards in Canada offer a wide range of appealing incentives. But credit cards come with debt risks if you’re not careful, no matter how good the perks are.
Thinking about signing up for a new credit card? Make sure your consumer debt is paid off completely or at least on its way to being paid off and that you have a solid budget in place (our free budget planner can help). Plus, don’t forget to assess your debt-to-income ratio. If it’s too high, you might trigger a slump in your credit score when you open a new credit account.
And if you still need support on your journey to a financially stable, debt-free life? We’re here to help. Talk to one of our credit counsellors today!
