Cashback vs Points: Which is Better?

How it works: Earn a percentage back on purchases (typically 1-5%), redeemed as statement credits or deposits.

Pros: - ✓ Simple to understand—1% back means 1 cent per dollar - ✓ No devaluation risk—a dollar is always worth a dollar - ✓ No blackout dates or complicated redemption rules - ✓ Usually no minimum redemption threshold - ✓ Great for everyday expenses

Cons: - ✗ Generally lower potential value than optimized points - ✗ No opportunity for outsized value - ✗ Can't transfer to travel partners

Best cashback cards in Canada: - Rogers World Elite: 1.5% on everything, 3% on USD - Tangerine Money-Back: 2% in chosen categories - CIBC Dividend Visa Infinite: 4% on gas/groceries

How it works: Earn points per dollar spent. Redemption value varies based on how you redeem.

Pros: - ✓ Can be worth more than cash when redeemed for travel - ✓ Transfer to airline partners for premium cabin flights - ✓ Aspirational redemptions (business class, luxury hotels) - ✓ Often higher earn rates in bonus categories

Cons: - ✗ Value depends on how you redeem - ✗ Points can be devalued over time - ✗ Complex redemption rules and sweet spots - ✗ May require more planning and flexibility

Best points cards in Canada: - Amex Cobalt: 5x on food, transfers to Aeroplan - Scotiabank Gold Amex: Up to 6x, Scene+ redemptions - TD Aeroplan Visa Infinite: Direct Aeroplan earning

Let's compare $1,000 monthly spending:

Cashback (2% card): - Monthly: $1,000 × 2% = $20 - Annual: $240 - Value is guaranteed

Points (2x card, 1¢/point value): - Monthly: 2,000 points = $20 - Annual: 24,000 points = $240 - Same as cash back at 1¢/point

Points with optimized redemption (2x card, 2¢/point value): - Monthly: 2,000 points = $40 value - Annual: 24,000 points = $480 value - 2x the value of cash back!

The key insight: Points CAN be worth more, but only if you redeem them strategically. If you redeem points for gift cards or merchandise, you often get less than 1¢/point.

Cashback is probably better for you if:

- ✓ You want simplicity with no optimization required - ✓ You don't travel frequently (once a year or less) - ✓ You prefer guaranteed value over potential value - ✓ You'd rather use rewards for everyday expenses - ✓ You don't want to track points or learn programs - ✓ You have irregular spending patterns

Ideal cashback user: Someone who spends moderately, doesn't travel much, and wants to set and forget their rewards strategy.

Points are probably better for you if:

- ✓ You travel at least a few times per year - ✓ You're willing to learn redemption strategies - ✓ You have flexibility on travel dates/destinations - ✓ You dream of flying business class or staying at luxury hotels - ✓ You enjoy the game of optimizing rewards - ✓ You have significant spending in bonus categories

Ideal points user: A frequent traveler willing to put in effort to maximize value, with flexibility to chase the best redemptions.

Why not both? Many savvy Canadians use multiple cards:

Example setup: 1. Amex Cobalt for dining and groceries (5x points) 2. Rogers World Elite for everything else (1.5% cash back) 3. Scotiabank Passport for travel purchases (no FX fees)

This way you: - Maximize points on high-value categories - Get solid cash back as a baseline - Avoid foreign transaction fees when traveling

The 2-card minimum: At least consider having one points card for travel/dining and one no-fee cashback card for everyday spending.