How cashback credit cards work

Cashback credit cards let you earn a small percentage of money back every time you use the card. Depending on the type of card, you’ll either earn a flare rate on all purchases, or higher rates in certain categories like groceries, gas, or dining. Some cards even reward differently for where you shop.

The cash back you earn accumulates in your account and can be redeemed as statement credit, direct deposit, or sometimes as gift cards, merchandise, or money towards a future purchase. The key is to pay off your balance in full every month, since carrying a balance can wipe out any rewards you earn due to interest. Let’s get into it.

Featured cashback credit cards

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Best instant approval cash back card

SimplyCash Card from American Express

Earn a minimum of 1.5% cash back on all purchases, and 3% on U.S. dollar purchases. Redeem rewards when you want.

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Annual Fee: $0

Interest Rates: 21.99% purchase, 21.99% cash advance, N/A balance transfer

Welcome offer: $100 value Earn a bonus 5% cash back on all purchases (up to $2,000 in purchases). That’s on top of your everyday cash back earn rates. That’s up to $100 in bonus cash back.

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Silver: Best cash back card

CIBC Dividend Visa Infinite Card

Earn 4% cash back on gas and groceries, and save at the pump with exclusive fuel discounts.

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Annual Fee: $120

Interest Rates: 21.99% purchase, 22.99% cash advance, 22.99% balance transfer

Welcome offer: $250 value Join and earn over $400 in value including a first year annual fee rebate.†

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Bronze: Best cash back card

SimplyCash Preferred Card from American Express

Get a minimum of 2% cash back on all your purchases—one of the highest base rates in Canada.

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Annual Fee: $120

Interest Rates: 21.99% purchase, 21.99% cash advance, N/A balance transfer

Welcome offer: $250 value Earn a bonus 10% cash back on all purchases for your first 3 months (up to $2,000 in purchases). Plus, earn a $50 statement credit when you make a purchase in month 13. This could add up to $250 in bonus value in your first 13 months.

What is a cashback credit card?

A cashback credit card is a type of rewards card that gives you a percentage of your spending back in the form of cash. Depending on the card, this could be a flat rate on all purchases, or tiered rates based on shopping categories (like 4% for grocery, 2% for transit, and so on). 

Compared to points or travel rewards cards, cashback cards are the most flexible. With cash back, the value is fixed. You’ll always know exactly what you’re earning and how you can use it. Points cards, on the other hand, tie your rewards to a specific program (like PC Optimum or Scene+), which can be great if you’re loyal to those retailers but more restrictive overall. Travel rewards cards can take it one step further in terms of overall value, especially when redeemed strategically for flights or hotel stays, but it’s more complex to get the full value out of those points.

Let’s take a look at some of the clear differences between cash back credit cards and travel rewards/points cards:

The bottom line: Cashback credit cards are best for simplicity and flexibility, and they offer a guaranteed discount on your spending. Travel rewards cards or points cards suit cardholders that want to maximize value on travel related purchases and can be trickier to get the most value out of.

How cashback credit cards work (aka how to earn cash back)

Cashback credit cards all work on the same principle. You earn a percentage of your purchases back as cash. How you earn varies depending on the card, though.

Flat rate rewards

These cards keep things simple by offering the same cashback rate on every purchase. You don’t have to track categories or spending caps, just swipe and earn. The earn rates tend to be a bit lower as a result of the flat rate, however. The Home Trust Preferred Visa is an example of this type of card.

A 1.5% flat-rate card like the Rogers Red World Elite Mastercard gives you $1.50 back for every $100 spent (and 3% on USD purchases!), no matter what you buy.

Boosted earn rates

Many cash back cards offer higher rewards in certain categories while giving a lower base rate on everything else. This makes them especially valuable if your biggest expenses align with the boosted categories.

The Scotiabank Momentum offers a whopping 4% back on groceries and recurring payments, 2% on gas and transit, and 1% on all other purchases. It typically offers a generous welcome bonus, too.

Pro Tip: Look for cards that match your biggest expenses. A 4% grocery card is only worth it if groceries are a large share of your monthly budget.

Custom or rotating boosted rewards

Some cards let you choose your own bonus categories, while others rotate them automatically. This gives you a bit more flexibility, but also requires more attention to detail.

With a card like the Tangerine Money-Back Card, you pick 2–3 categories to earn extra cash back in—and you can change them every 90 days. Cards like the CIBC Adapta Mastercard automatically boost whichever categories you spend the most on each month.

Pro Tip: Always pay your balance in full. Carrying even a small balance at 20% interest can wipe out months of rewards quickly.

How to redeem your cash back

Earning rewards is only half the story, redeeming them is where you see the value. Most cashback credit cards give you a few options:

• Statement credits: The most common method. You apply your cash back directly to your credit card balance, lowering what you owe.
• Direct deposit or cheque: Some issuers allow you to transfer your rewards straight to your bank account or request a mailed cheque.
• Automatic redemption: With certain cards, your cash back is automatically applied once you reach a set threshold.

Gift cards or merchandise: A few programs allow redemption for retailer gift cards or purchases through the issuer’s online rewards story, or even cash off a purchase.

Pro Tip: Redeem as a statement credit or direct deposit whenever possible. Gift cards or merchandise redemptions sometimes offer less value.

Are cashback credit cards worth it?

Cashback credit cards can absolutely be worth it. If they match your spending habits and you use them responsibly, it’s more money back in your pocket. Whether that money back adds up meaningfully depends on how and where you spend, the fees involved, and whether you carry a balance.

Many Canadian cardholders praise cash back cards for their reliability. That said, your habits pay a huge factor into the value you can extract from a card.

In other words, the best card isn’t always the one with the highest headline rate; it’s the one whose bonus categories align with your real expenses (groceries, gas, bills, etc). Another use echoed this when comparing card stacking:

That kind of strategy (splitting purchases across multiple cards to max out returns) is common among diligent users. But for many everyday spenders, a simple approach matters just as much as (if not more than) yield. Consider whether or not you’re likely to carry a balance, or whether certain caps on earning categories might make a card more restrictive than it seems at face value.

The best cash back credit cards in Canada

If you’re in the market for a cash back credit card, here are some of our favourites:

Rogers Red World Elite Mastercard

The Rogers Red World Elite Mastercard stands out to us as the best no-fee cash back credit card in Canada. It earns a flat 1.5% cash back on all Canadian purchases, so you don’t have to juggle categories, plus an impressive 3% on U.S. purchases (enough to cover foreign transaction fees!) On top of that, it packs in travel perks like lounge access, emergency medical coverage, and trip cancellation insurance.

CIBC Dividend Visa Infinite

The CIBC Dividend Visa Infinite is one of the strongest cash back cards for everyday essentials, with 4% back on groceries and gas (including EV charging!), among the best rates in Canada. It also offers 2% back in dining, transit, and recurring bills, plus 1% everywhere else. It also has a flexible redemption policy that lets you cash out whenever you want. Plus, you can link it with a Journie Rewards account to save up to 10 cents per litre at partner gas stations.

Tangerine Money-Back Credit Card

The Tangerine Money-Back Credit Card is one of the most flexible no-fee cash back cards in Canada, allowing cardholders to choose up to three bonus categories (from 10 options) to earn 2% cash back. All other purchases earn 0.5% cash back. You can also switch your categories with a 90 days’ notice, making it easy to adapt the card to your spending habits. Rewards are paid monthly, too.

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More about credit cards:

• The best no-fee credit cards in Canada
• These credit cards can help you save big on travel to Orlando
• The best travel credit cards in Canada
• Best Air Miles credit cards in Canada

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