Best credit cards for Rewards

In 2024, navigating the landscape of credit card rewards in Canada requires a strategic approach and a bit of knowledge of the credit market. The options can be overwhelming, but armed with the right information, you can maximize your benefits and make the most of your spending. From cashback to travel perks, the best credit card rewards in Canada for 2024 cater to diverse lifestyles and financial goals.

Whether you're a globetrotter seeking sky-high reards or someone aiming to stretch every dollar, there's likely a variety of options in the credit card market for you. By understanding your spending habits and financial goals, you can choose the card that best aligns with your lifestyle, ensuring that every purchase you make brings you one step closer to your dreams.

Our comprehensive guide provides the ins and outs of navigating rewards credit cards. From exploring how rewards programs work to which one is the best option for you, we explain the rewards credit card process and the terminology you'll likely encounter to help you make informed choices as you compare the top contenders in rewards credit cards in Canada.

What are credit card rewards?

Credit card rewards are incentives offered by credit card issuers to encourage cardholders to use their cards for purchases. These rewards can come in various forms, including cashback, points, miles, or other loyalty program benefits.

Points-based rewards or cash back credit cards are typically the most common rewards credit cards in the market. Cashback rewards offer a percentage of the amount spent on purchases credited to the cardholder's account. Points-based rewards systems allow cardholders to earn points for every dollar spent, which you can redeem for rewards such as merchandise, gift cards, travel bookings, or statement credits. Miles-based rewards function similarly to points but are often geared towards travel-related expenses, allowing cardholders to accumulate miles for airline tickets, hotel stays, or other travel perks.

In addition to these basic reward structures, credit card issuers may offer additional benefits such as sign-up bonuses, promotional offers, discounts, access to exclusive events or experiences, travel insurance, concierge services, and more.

Overall, credit card rewards provide cardholders with tangible benefits for using their cards for everyday purchases, making them a popular choice for consumers looking to maximize their spending power and earn perks along the way.

How do credit card rewards programs work?

Rewards credit cards work by incentivizing cardholders to use their credit cards for purchases in exchange for earning rewards such as cashback, points, miles, or other perks. Here's a breakdown of how these programs typically operate.

Earning rewards

Cardholders earn rewards by using their credit cards for eligible purchases. The rewards are typically based on a percentage of the amount spent, with higher reward rates often applied to specific categories such as grocery purchases, gas purchases, dining at restaurants, travel, or other select merchants. Some cards may offer flat-rate rewards on all purchases. As you spend money, you can earn points, miles, or cash back rewards to redeem later.

Accumulating rewards

As cardholders make purchases, they accumulate rewards based on the terms and conditions of their credit card's rewards program. Rewards are usually tracked and tallied in the cardholder's account as cashback credits, points, or miles.

Redeeming rewards

Cardholders can redeem credit card rewards for a variety of options, depending on the specific rewards program. The most common redemption options to redeem rewards include:

• Cash back: Redeem rewards for statement credit, direct deposits to a bank account, or checks.

• Points: Redeem points for travel bookings, merchandise, and gift cards.

• Miles: Redeem miles for airline tickets, upgrades, hotel stays, rental cars, and other travel-related expenses.

Bonus and promotional offers

Many credit card rewards programs offer sign-up bonuses to new cardholders who meet specified spending requirements within a timeframe after opening an account. Additionally, card issuers may run promotional offers or bonus categories that allow cardholders to earn extra rewards for spending in specific categories or during certain periods. The welcome bonus can further incentivize cardholders to sign up for a particular rewards credit card.

Annual fees and terms

Some rewards credit cards may come with annual fees, which cardholders should consider against the value of the rewards and benefits offered. It's also important for cardholders to familiarize themselves with the terms and conditions of the rewards program, including any limitations, restrictions, expiration dates on rewards, and any changes to the program that may occur over time.

Do credit card points expire?

When you accumulate rewards, you want the flexibility to use your points, cash back, and miles whenever you want. Whether credit card points expire depends on the specific rewards program associated with the credit card. Here are some general considerations regarding the expiration of credit card points.

Rewards program policies

Each credit card issuer has its own rules regarding point expiration. Some issuers never let points expire as long as the account remains active and in good standing, while others may have set expiration dates.

Account activity

Many credit card rewards programs require some form of account activity to keep points from expiring. It could mean making at least one purchase within a certain period, such as every 12 or 24 months. If the account remains inactive for too long, points may expire.

Program changes

Credit card issuers can change the terms of their rewards programs, including point expiration policies. Cardholders should be informed about any updates or changes to their credit card's rewards program by reviewing communications from the issuer.

Transferable points

Some rewards programs, particularly those offered by major banks with transferable points, may have different rules when points are transferred to travel partners. In some cases, once points are transferred to an airline or hotel loyalty program, they are subject to the expiration policies of that program. Again, check your credit card's terms and conditions to learn more about how transferring points work for the specific rewards program.

Cancellations

If a cardholder closes their credit card account or if the issuer closes it due to inactivity or other reasons, any accumulated points may be forfeited unless transferred or redeemed before account closure.

To avoid losing your hard-earned points, regularly check your account activity and ensure you meet the requirements to keep your rewards active. You can redeem points periodically as a statement credit, travel bookings, merchandise, and gift cards so your points don't go to waste. Lastly, stay informed about the specific terms and conditions of your credit card rewards program. Understanding these factors can help you manage your rewards effectively and maximize the benefits of your credit card points.

Can I get a rewards credit card with bad credit?

Obtaining a rewards credit card with bad credit can be challenging, but it's not impossible. While most rewards credit cards require good to excellent credit, there are still options available for those with lower credit scores.

While getting a rewards credit card with bad credit is more challenging, there are still viable options that can help you earn rewards while you rebuild your credit. Consider secured credit cards with rewards, subprime rewards credit cards, and retail credit cards as starting points. Simultaneously, focus on improving your credit score to qualify for more attractive rewards cards in the future.

Secured credit cards

Secured credit cards require a cash deposit as collateral, which typically determines your credit limit. Some secured cards offer rewards programs, though they may not be as generous as those on unsecured cards.

Subprime rewards credit cards

There are a few credit cards specifically designed for people with fair to poor credit that also offer rewards. These cards often come with higher interest rates and fees, like annual fees, but they can be a good stepping stone for qualifying for other cards and rewards programs.

Retail credit cards

Store-branded credit cards are often easier to qualify for and may come with rewards for purchases made at the retailer. However, these cards usually have higher interest rates and can only be used at specific stores. Retail credit cards may also have loyalty programs that offer perks to customers who shop at their stores or partner brands.

Do rewards credit cards cost money?

Rewards credit cards can come with various costs, depending on the specific card and its features. By selecting a card that aligns with your spending habits and financial goals, and by managing your account responsibly, you can maximize the value of your rewards while minimizing associated costs.

Annual fees

Many rewards credit cards charge an annual fee, which can range from modest to quite substantial. Premium cards with extensive perks and higher rewards rates often have higher fees.

Interest rates

Rewards credit cards typically have interest rates that apply to carried balances. These rates can be higher than those on non-rewards cards. It's important to pay off your balance in full each month to avoid interest charges, which can negate the value of any rewards earned.

Foreign exchange fees

The foreign exchange fee applies to foreign currency purchases. Some rewards cards waive this fee, making them more advantageous for frequent travelers.

Balance transfer fees

If you transfer a balance from one credit card to another, you may incur a balance transfer fee. This fee is usually a percentage of the amount transferred. Some rewards cards offer promotional balance transfer rates but still charge a fee.

Cash advance fees

Using your credit card for a cash advance can be costly. Fees often include a percentage of the amount advanced plus a higher interest rate that starts accruing immediately. Rewards do not typically apply to cash advances.

Late payment fees

Failing to make at least the minimum payment by the due date can result in late payment fees. Additionally, late payments can lead to a penalty APR, which is a higher interest rate applied to your balances.

Over-limit fees

Some credit cards charge a fee if you exceed your credit limit, although this fee is less common than it used to be. Credit card companies may limit how often the fee can be charged.

Why is there an annual fee on my rewards credit card?

Not all credit cards have annual fees, but many do. The annual fee on rewards credit cards is charged once a year in a lump sum or as part of your monthly billing period. The annual fee allows the cardholder to use the rewards credit card to make purchases and helps offset the cost of the rewards and loyalty programs and perks offered.

Here are the primary reasons why credit card companies charge annual fees.

Enhanced rewards programs

Rewards credit cards often offer substantial perks, including higher cashback rates, more points per dollar spent, or lucrative miles programs. The annual fee helps cover the cost of these generous rewards and makes it possible for the credit card company to continue to offer these programs. For example, a travel rewards credit card may have high fees to maintain the travel services and perks to frequent flyers.

Premium benefits

Cards with annual fees frequently come with premium benefits that provide significant value to cardholders. These benefits can include:

• Travel insurance: Comprehensive coverage for trip cancellations, medical emergencies, lost luggage, and more.

• Airport lounge access: Free or discounted access to airport lounges.

• Concierge services: Personalized assistance for travel bookings, event tickets, and restaurant reservations.

• Exclusive offers: Access to special events, pre-sale tickets, and unique experiences.

Welcome bonuses

Many rewards cards offer substantial sign-up bonuses to attract new customers. The welcome bonus may include thousands of points, a significant amount of cashback, or free travel miles, which can offset the cost of the annual fee in the first year and beyond.

Operational costs

Issuing banks incur various costs to manage and maintain credit card accounts, including customer service, fraud protection, and technology infrastructure. The fees help cover these operational expenses, ensuring that the card issuer can continue to provide a high level of service.

Better overall value

By charging an annual fee, issuers can offer a higher overall value proposition to cardholders who utilize the card's benefits extensively. For example, frequent travelers might find that the travel perks, insurance, and lounge access more than compensate for the annual fee.

Targeted customers

Annual fees can help issuers target specific market segments. High-fee cards often cater to affluent consumers who are willing to pay for premium benefits, while no-fee or low-fee cards appeal to more cost-conscious individuals.

What are the types of rewards I can earn?

Credit card rewards programs offer a variety of rewards types designed to appeal to different spending habits and preferences.

Cash back rewards

Cash back credit cards are a common type of rewards program. Cash back credit cards provide a percentage of the amount spent back to the cardholder. This can be in the form of a statement credit, check, or direct deposit into a bank account. Whether cash back cards are worth it depends on your spending habits, goals, and lifestyle. Common cash back structures include flat-rate cash back, tiered cash back, and rotating categories.

A flat-rate cash back rewards card offers a fixed percentage on all net purchases. The tiered cash back structure offers different percentages on different categories, such as dining, groceries, and other eligible purchases. The rotating categories model offers higher cash back earnings on specific categories that change quarterly.

Points rewards

Points rewards programs allow cardholders to earn points for every dollar spent. These points can typically be redeemed for a variety of options, including:

• Merchandise: Electronics, home goods, apparel, and more through the card issuer’s online rewards portal.

• Gift cards: Gift cards to a wide range of retailers, restaurants, and service providers.

• Travel: Book flights, hotels, car rentals, and vacation packages through the card issuer’s travel portal.

• Cash back: Convert points to statement credits or cash deposits, often at a specified rate.

Miles rewards

Miles rewards programs are especially popular with travelers. Cardholders earn miles for every dollar spent, which can be redeemed for:

• Flights: Book flights on various airlines, often through the card issuer's or an airline's rewards program.

• Hotel stays: Redeem miles for hotel accommodations.

• Travel upgrades: Use miles to upgrade to business or first-class flights.

• Travel experiences: Access exclusive travel experiences, such as guided tours and special events.

Travel rewards

Some cards offer rewards points specifically tailored for travel-related expenses. These points can often be transferred to airline or hotel loyalty programs. Examples include discounted hotel stays and car rental bookings, rental car insurance, luggage protection, and trip cancellation protection.

Retail rewards

Retail-specific credit cards provide rewards that can only be used at the issuing retailer. These cards often offer higher rewards rates for purchases made in-store or on the retailer’s website. Examples include:

• Store credits: Earn points or cash back that can be redeemed for store credit.

• Exclusive discounts: Receive additional discounts or offers for cardholders.

Retail rewards credit cards may also have point collection systems for discounts or other loyalty programs.

Flexible rewards

Some rewards programs offer flexible points that can be redeemed for a wide variety of options, providing greater choice for cardholders.

Do rewards credit cards have additional perks?

Yes, rewards credit cards often come with a variety of additional perks beyond just cash back, points, and miles. These extra benefits can add significant value to the card and enhance your overall experience. Here are some common additional perks that many rewards credit cards offer:

Travel benefits

• Airport lounge access: Many premium cards provide access to airport lounges worldwide, offering a comfortable space to relax before flights.

• Travel insurance: Comprehensive travel insurance coverage, including trip cancellation, trip interruption, lost luggage, and travel accident insurance.

• Global entry/pre-check: Statement credits to cover the application fee for expedited security screening programs.

• Hotel elite status: Complimentary or accelerated elite status in hotel loyalty programs, providing benefits like room upgrades, late checkout, and free breakfast.

Purchase protection

• Extended warranty: Extends the manufacturer’s warranty on eligible purchases, often by an additional year or more.

• Purchase protection: Covers new purchases against damage or theft for a certain period, usually 90 to 120 days.

• Price protection: Reimburses the difference if you find a lower price on an item you purchased within a specified timeframe.

Concierge services

Many high-end credit cards offer 24/7 concierge services to assist with various needs, such as making travel arrangements, booking dining reservations, securing event tickets, and more.

Rental car insurance

Coverage for rental car damage and theft, allowing you to decline the rental company's insurance. This benefit can save money and provide peace of mind when renting a vehicle.

Exclusive access

• Event tickets: Early access to tickets for concerts, sports events, theater performances, and other exclusive experiences.

• Special experiences: Invitations to cardholder-only events, such as private dinners, wine tastings, or cultural events.

No foreign transaction fees

Many rewards cards waive foreign transaction fees, which can save you money when making purchases abroad.

Cell phone protection

Coverage for damage or theft of your cell phone when you pay your monthly cell phone bill with a credit card. Other cell phone perks may include mobile device insurance.

Dining and shopping benefits

• Discounts and offers: Special discounts and offers at partner retailers, restaurants, and online stores.

• Dining programs: Access to exclusive dining experiences, preferred reservations, and discounts at select restaurants.

Reward Bonuses

• Anniversary bonuses: Extra points, miles, or cashback are awarded each year on your cardholder's anniversary.

• Spending bonuses: Bonus rewards for reaching certain spending thresholds within a specified period.

Flexibility in rewards redemption

Some cards offer flexible redemption options, such as:

• Point transfer: Transfer points to various airline and hotel loyalty programs.

• Pay with points: Use points to pay for travel expenses, statement credits, or even directly at checkout with certain retailers.

How to maximize your credit card rewards

Maximizing your credit card rewards involves strategic planning and disciplined spending to make the most out of the benefits offered by your card. Here are some key strategies to help you get the most value from your rewards credit card:

Choose the right card

Select a card that offers the highest rewards in categories where you spend the most, such as groceries, dining, travel, gas, and other eligible purchases. If you want to take advantage of different offers, you can use multiple credit cards for different spending categories to maximize rewards. For example, one card might offer great travel rewards while another offers high cashback on groceries.

Take advantage of sign-up bonuses

Sign-up bonuses can provide a significant amount of points, miles, or cashback. Ensure you meet the spending requirements within the specified timeframe to earn these bonuses. Time your major purchases around opening a new card to help meet the sign-up bonus requirements.

Utilize bonus categories

Use your card strategically in its bonus categories. For example, if your card offers 5% cashback on dining, use it for all your restaurant expenses. For cards with rotating bonus categories, make sure you are aware of the current categories and activate them if required.

Leverage reward redemption options

Points and miles can often be worth more when redeemed for travel rewards compared to other options like merchandise or gift cards. Some cards allow you to transfer points to airline or hotel partners. This can often provide better value than redeeming directly through the card issuer's portal.

Monitor promotions and offers

Regularly check for special promotions and offers that can boost your rewards. This includes seasonal promotions, retailer-specific bonuses, and limited-time offers. You can subscribe to newsletters or follow blogs that track credit card rewards offers and strategies.

Use shopping portals

Many credit card issuers have online shopping portals that offer additional points or cashback for purchases made through their links. Always check these portals before making an online purchase.

Pay your balance in full

Carrying a balance and paying interest can negate the value of your rewards. Always pay your balance in full each month to avoid interest charges. You can set up automatic payments for recurring bills so you don't forget to pay off your balance.

Use the card benefits

Make use of travel benefits such as lounge access, travel insurance, and no foreign transaction fees. Take advantage of purchase protections like extended warranties, purchase protection, and price protection. Redeeming the points on your rewards card helps you save money and can provide a better experience whether you're traveling or shopping.

Monitor your rewards and expiration

Regularly check your rewards balance and monitor any expiration dates to ensure you don’t lose points or miles. Use calendar reminders for important dates like the end of a promotional period or the expiration date of your points.

Plan your spending

Use your credit card for large expenses like home improvements or medical bills to rack up rewards quickly. You can also make everyday purchases with credit, like eligible gas, groceries, and dining purchases to consistently earn rewards. If you frequently buy groceries, you can choose a credit card for groceries that offers bonus points in that category.

Plan your spending and stick to a budget to ensure you can manage your debt and avoid harming your credit history. Learn 8 tips on how you can use a credit card responsibly to help you manage your rewards credit card.

Should you have multiple rewards credit cards?

Having multiple rewards credit cards can be a strategic way to maximize your rewards and benefits. However, it depends on your financial situation, spending habits, and ability to manage multiple accounts responsibly.

Different cards offer higher rewards in specific spending categories such as groceries, dining, travel, or gas. By using the card that provides the highest rewards for each purchase category, you can maximize your earnings.

In addition, sign-up bonuses can provide substantial rewards, such as points, miles, or cash back, often worth hundreds of dollars. Opening multiple cards strategically to earn these bonuses can significantly boost your rewards.

Some rewards programs are better for specific types of redemptions, such as travel or merchandise. By holding cards from different issuers, you have more flexibility in how you redeem your rewards. It makes it easier for you to use your points.

Lastly, having multiple cards can increase your overall available credit, which can help lower your credit utilization ratio (the amount of credit you're using compared to your total available credit). A lower utilization ratio can positively impact your credit score.

While there are benefits to having multiple credit cards, debt management can be more complex as you track different billing periods and monthly or annual fees. If you have multiple cards with annual fees, they can quickly add up and outweigh the pros of your rewards cards.

Opening multiple new accounts in a short period can lead to hard inquiries on your credit report, which might temporarily lower your credit score. Additionally, the average age of your credit accounts may decrease, impacting your score.

Are rewards credit cards worth it?

There are pros and cons to a credit card offering rewards points, cash back, miles, and bonus perks and features. Whether you're deciding between cash back vs. points or different perks and services, assess your lifestyle, spending habits, goals, and preferences.

Rewards credit cards can be worth it for many people, but their value depends on your spending, what they want, financial discipline, and ability to maximize the benefits while minimizing costs. For example, if you travel a lot, you can consider an Aeroplan credit card for travel benefits. You can also take advantage of additional perks like mobile device insurance.

Compare rewards credit cards and decide whether you want a travel rewards credit card or a cash back credit card. Review the terms and conditions carefully to ensure you agree with the rewards and points system and understand the fees and interest rates associated with the card. Many rewards cards offer bonus points for new cardholders, which can help you earn rewards quicker in the beginning.

If the rewards and benefits outweigh the costs and you can manage the card responsibly, a rewards credit card can be a valuable financial tool. However, if you’re prone to carrying a balance or the annual fees don’t justify the rewards, it may not be the best choice for you. You can also look at no-fee credit cards.

Earn cash back rewards with KOHO

The KOHO virtual credit card provides you with the flexibility to shop at your convenience and settle your balance later, offering three different plans starting from as little as $4 per month. We're here to support you in managing your spending and savings objectives and developing strong financial management skills, whether it involves earning interest on savings or responsibly using credit.

We offer valuable guidance to track your spending and set limits, helping you maintain an optimal credit utilization ratio. Our overdraft protection coverage offers interest-free cash advances, acting as an emergency fund when you have unexpected expenses. By subscribing and promptly repaying advances, you can avoid additional fees.

With our intuitive app and platform, you get insights on how to plan for spending and savings goals to maximize the value of your dollars and reach your financial goals faster. You can request a free credit score to monitor your credit history, such as credit card utilization and new credit accounts. Get alerts for activities with your credit card so you can stay on top of credit card and debt management.

Discover how to build your credit with KOHO, earn interest in a high-interest savings account, and earn cash back while managing your spending and savings with us. If you require business solutions, explore how KOHO for enterprises can meet your needs.