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Cash Back Vs Points: Maximizing Your Money with Every Swipe

6 min read

cashback vs points

Written By

Nick Saraev
Nick Saraev

Credit cards have transcended beyond mere payment methods; they have become a smart strategy for shoppers to earn while they spend. The Canadian market is abundant with options, from rewards credit cards tocash back credit cards, all promising to add value to our daily transactions.

The appeal is simple and compelling: Every swipe or tap can potentially bring a slice of our money back to us or open up opportunities for rewards that sweeten the deal of our regular spending.

It's a trend that's catching on, with a striking79% of Canadians using a primary credit card that offers some form of reward. This is why the discussion about cash back vs rewardscredit cards in Canada is such a popular topic today. Rewards credit card use as well as the interest in cash back credit card access is gaining popularity and that means more people need to understand what their rewards credit cards can offer and how to properly use them.

Whether it’s a rebate on the week’s groceries or points towards a much-anticipated vacation, consumers are getting more from their purchases than ever before. Let's dive into the cash back vs rewards credit card discussion!

What are credit card points?

Imagine every swipe of your rewards credit card as planting seeds in a garden of benefits. Rewards credit card use can yield benefits for the most mundane and everyday purchases. These seeds arecredit card points, and they grow into rewards that can sweeten your life with travel, tech, or savings on your statement credit. The options available for points and cash back card spending are vast and offer many opportunities to earn rewards for your everyday purchases.

It's a heartfelt 'thanks' from your credit card company, acknowledging every choice to use their service. But the perks don't stop at material gains. These points are also silent architects of your credit reputation, laying brick by brick towards arobust credit score.

The magic of credit card points lies in their versatility. Some might sprout more value when redeemed for airfare, while others might be best used for that new gadget you've been eyeing.

Every purchase, whether it's your morning coffee or weekly fuel fill-up, is an opportunity to accumulate these reward points, each with its own potential to enrich your spending experience.

With a wise swipe, the mundane act of buying can yield a rich harvest of points, turning everyday transactions into a treasure trove of potential treats. That is the true appeal of credit card rewards.

When credit card points offer more value

The dance of maximizing credit card points is much like waiting for the perfect wave—timing is everything. Sometimes cash back credit card points are better and sometimes the cash back itself is the better option. Understanding what points and cash back credit card options entail will make the decision-making process easier.

Navigating credit card rewards wisely is all about timing. Holding onto your points and knowing the right moment to redeem them can transform modest earnings into significant rewards.

It's that moment when a flight to a sun-drenched beach costs you little more than the points you've nurtured. Or when a high-end mixer appears on your kitchen counter, acquired with nothing but a well-timed click during a seasonal promotion.

This strategic play is the best way to get the most out of your credit card perks and unlock the value of every point and all of your cash back credit card points and miles.

How do cash back rewards work?

Cash back credit card rewards are the epitome of simplicity in the credit card rewards arena. Here's how they work: for every dollar you spend, a certain percentage gets returned to you.

So, if yourcash back credit card offers a 1% cash back reward and you spend $1,000, you'll see $10 flowing back into your pocket. It’s instant gratification with every purchase, whether you’re filling up the tank or stocking up on groceries.

Unlike travel points or miles, which can fluctuate in value and require strategic redemption, cash back is a straightforward currency added directly to your balance.

It's a transparent, uncomplicated process—spend on necessities or splurges and get rewarded with real money, not points or miles. This is why cash back credit card use is on the rise and why more and more people are looking for these kinds of credit card options.

Is cash back really worth it?

The appeal of cash back credit cards lies in their simplicity, but it’simportant to weigh if they’re truly cost-effective. Sure, earning cash back is straightforward – spend money and get a percentage back.

However, this simplicity of the cash back credit card setup can be overshadowed by transaction fees andannual fees, which might nibble away at the rewards you accumulate.

On the flip side, cards that allow you to redeem rewards and points for lavish perks might outshine cash back offers, especially if they come with impressive sign-up bonuses or travel benefits.

For those who take pleasure in uncomplicated, immediate benefits, cash back could be a perfect match, providing a clear, quantifiable return on everyday purchases without the need to strategize over points. Cash back credit cards provide options other cards do not provide.

Earning points vs. cash back: pros and cons

When it comes to choosing rewards cards, thebattle between points and cash back is a perennial one. Each has its virtues and vices, akin to selecting between a multifaceted Swiss Army knife and a straightforward straight razor.

Let’s delve into the world of credit card rewards and dissect the pros and cons. Understanding cash back rewards and points for rewards credit cards can make it easier to use them effectively.

Cash back cards pros

  • Low or no annual fees: Cash back credit cards often boast an attractive fee structure, appealing to those who balk at the idea of paying to spend. The lower overhead can make these cards a wallet-friendly option for frugal minds. You won't lose money to fees and can get more of your reward earnings to your bank account.

  • Cash rewards: The allure of seeing actual currency returning to your pocket cannot be understated. There's a definitive satisfaction in seeing your spending habits pay off—literally. With cash back, the rewards are not just numbers on a screen but tangible money that can reduce your credit card bill or be spent elsewhere for grocery purchases, travel, and other purchases.

  • Ease in redeeming cash back: Simplicity is king when it comes to cash back. Redeeming your earned cash is typically as easy as a few clicks on a website or a quick phone call. There’s no need to navigate a labyrinth of reward program rules or blackout dates. You can also redeem cashback options to your bank account or other connected account opening relatively easily. Cash back cards offer unique options that other cards do not.

Cash back cards cons

  • Earnings caps: While earning cash back on everyday purchases can feel like a constant high, many cards put a ceiling on how much you can earn, which can abruptly stop the reward party just when you’re getting started.

  • Limited perks: Cash back cards usually don’t come with the suite of perks that travel cards do. You might miss out on the airport lounge access, free checked bags, or hotel upgrades that points can unlock. It is something to consider when looking at cash back cards and weighing the options of cash back credit cards.

  • Lower sign-up bonuses: If you’re looking to make a splash with a hefty initial rewards haul, cash back cards may disappoint. Their sign-up bonuses are generally more modest compared to the lucrative offers of points cards.

Points pros

  • Sign-up bonuses: Many rewards cards with points systems entice you with generous sign-up bonuses. These bonuses can often be the equivalent of a free flight or a couple of nights at a fancy hotel. earning points and miles for gas and grocery purchases and other cash back credit card rewards is a major perk of this type of credit card.

  • Travel perks: For the wanderlust-stricken, points are the ticket to travel luxury. From business class upgrades to hotel suite access, the travel perks alone can be worth the plunge into the points game. Unlike cash back credit cards these rewards points and miles can be redeemed for other eligible purchases and uses.

  • Flexible redemptions: The true power of points lies in their versatility. They can be transferred to various airline and hotel partners, often increasing their value exponentially. This flexibility in the rewards structure means you can strategize to use points for more than just travel—think merchandise, gift cards, or even charity donations.

Points cons

  • Annual fees: Points-chasing cards often come with annual fees that can be steep. You’ll need to ensure that the benefits you reap outweigh the costs of maintaining the card. Also, eligible purchase can also be limited by some credit card companies or bank account managers.

  • Complex redemption systems: The potential of points comes with a caveat: a complex redemption system to redeem points and get credit card cash points. It can take time and effort to understand the ins and outs, which can be daunting for the uninitiated.

  • Variable point values: One of the trickiest aspects of points is their fluctuating value and different rewards cards processes. What seems like a mountain of points one day can deflate in value the next, depending on market dynamics and reward program alterations.

If you yearn for simplicity and a clear-cut return on your spending, a cash back credit card might be your best bet. It offers the easiest rewards structure and easiest way to earn rewards that can be used quickly and easily. You can redeem points and miles and other rewards points with minimal fuss.

However, if you’re game for a bit of complexity and relish the thought of optimizing your rewards for travel or other luxuries, then diving into the points pool could prove to be more fruitful.

Remember, the choice between points and cash back isn’t just about the rewards—it’s about how well they align with your lifestyle and spending habits.

Credit and savings support for rewards cards

Dive into the world of savvy spending and rewarding savings with KOHO, a standout among the best rewards credit cards in Canada. This innovative approach is shaking up the credit card scene, offering you avirtual card that's ready in a snap—no credit checks, no waiting. Say goodbye to the days of waiting for a physical card and the hassle of setting up and using a traditional bank account or savings account for purchases. Instead embrace the eco-friendly alternative that slips seamlessly into your digital wallet, ready for every tap and click.

Whether you're navigating the checkout line or globe-trotting, a virtual card is a secure and smart financial companion. You can manage your points, get credit card cash rewards, and other benefits on eligible purchases. Instant approval catapults you into a realm of rewards, as these reward cards equip you for in-store and online spending without delay or traditional credit checks.

KOHO credit and savings solution

Elevate your daily transactions with a card that's not just about spending but also about earning andcredit score building. With KOHO, you can garner up to 6% cash back on select categories, making it a top contender for the best rewards credit cards out there. Dive further into KOHO’s alluring cash back programs and savor the taste of savings and rewards at KOHO Instant Approval, Credit Building, 2% Cash Back Partners, and explore the full suite of KOHO Features designed to enhance your spending strategy. Start earning perks, points, and cash back on eligible purchases and make the best possible use of your points and cash back cards.

Note: KOHO product information and/or features may have been updated since this blog post was published. Please refer to our KOHO Plans page for our most up to date account information!

Nick Saraev

Nick is a freelance writer and entrepreneur with a particular interest in business finance. He's been featured in publications like Popular Mechanics and Apple News



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