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What’s the point of complicated credit card rewards? Why I choose cash back over points

This article is sponsored by CIBC. The thoughts and opinions are my own.

I’ve got a secret. Despite being a credit card expert who regularly covers the ins and outs of how rewards points programs work and the tricks behind “travel hacking,” I always gravitate towards a cash back credit card. And I’m not alone.

Survey after survey1, both in Canada and south of the border, shows that cash back is the most-universally liked type of reward. I mean, what’s not to love? Cash back rewards are as simple as it gets, and you never have to work your way around charts or maps or calculate the real-world value of your rewards. Cash is cash, plain and simple.

Now, don’t get me wrong, credit card points programs certainly have merit, and I, myself, have a points credit card or two in my wallet. But for the sake of simplicity and transparent value, cash back cards are king. Here’s why:

Reason 1: Cash back has a clear value

You never need to bust out a calculator or do complicated math equations to work out how much your cash back rewards are worth. With the CIBC Dividend® Visa Infinite*, for instance, you know you’ll be getting 4% cash back on groceries2 and 2% cash back on dining.2 That’s the equivalent of 4 cents and 2 cents back respectively on every dollar spent. Simple, quick, and easy.

That’s not the case with points programs. Redemption rules and point values can differ quite dramatically from one program to the next. With many travel points programs, you’ll even have to study intricate rewards charts or maps, where your point values can fluctuate depending on where you’re flying to and from. And sometimes, the time of the year you’re travelling can impact points values too. It can all get quite elaborate and adds a further degree of complexity if you’re just trying to figure out the real-world value of your rewards points.

Of course, points program can be incredibly lucrative, and you could net some nice rewards or free trips. But, it often involves some mental gymnastics because the redemption process and point values aren’t as straightforward. Cash back is far simpler.

Card details

  • Annual fee: $120 (rebated for the first year)
  • Welcome offer: Get 10% cash back on all purchases for the first four statement periods (up to $200 cash back)
  • 4% cash back on eligible groceries and gas
  • 2% on eligible dining, daily transit, and recurring bill payments
  • 1% on all other purchases
  • Annual income required: $60,000 (personal) or $100,000 (household)
  • ‡ Conditions apply

Reason 2: Cash back can be redeemed for virtually anything

There are few restrictions on how to use your cash back rewards. Depending on your credit card issuer, your cash back comes automatically in the form of a credit and is deducted from your balance (either monthly or yearly). Or, with any of CIBC’s cash back cards, you can redeem your cash back whenever you want and at your own discretion once you have earned at least $25 in cash back. These cash back credit cards are a great way to automatically save on your everyday eligible card purchases, from gas and groceries, to restaurants and that new flatscreen TV.

Most points programs don’t offer the same degree of flexibility as cash back rewards. Depending on the program, you may only be able to redeem points from certain airlines or hotel chains or for merchandise and gift cards from a handful of affiliated retailers—retailers that might not fit with your particular shopping habits. While some points programs technically let you redeem points for a statement credit to apply towards your balance, you may not be getting a great return on your points (more on that in the next section).

Reason 3: Cash back values are always consistent

I know with the cash back earned on my CIBC Dividend® Visa Infinite* card, my rewards value will always be consistent. 1% in cash back always equals to 1 cent per dollar—no matter what.

With points programs, the value of your points can vary, depending on what you redeem for. The majority of points programs in Canada offer the highest returns when redeemed for travel. For instance, while 1 point may be worth 1 cent when used towards a flight, you might only get 0.7 cents per point when redeeming those same points for gift cards, or 0.5 cents per point when redeeming for statement credits—all within the same program. Those are huge discrepancies, and it means you may get considerably lower returns if you’re not strictly redeeming points for travel rewards.

Reason 4: Cash back is easier to track and never expires

“Keep it simple” is my motto, and I love that with cash back my rewards are easy to keep track of. And better yet, unlike some points programs, cash rewards don’t expire since they’re automatically deducted from your balance.

Some points or travel reward programs may force you to redeem your points within a set time period or at least keep your account active if you don’t want to risk losing your rewards. Because of the risk of expiration, you always have to stay on top of tracking your points. It’s worth noting though, many programs (like CIBC Aventura®) don’t have an expiry date on points.

Reason 5: Cash back discourages hoarding rewards

Since I can use cash back to help cover the cost of everyday purchases on my credit card statement, I redeem them often and I realize my savings sooner. Thanks to CIBC’s new on demand cash back feature, I can even redeem my cash back rewards as many times as I want once I have earned $25 in cash back.

With points programs, I’ll often hoard points for months, hoping to save up for the next big trip. And sometimes I even hold on to my rewards just because it feels satisfying to see a large number of points in my balance. But I know that hoarding is a drawback because I’m not actually taking advantage of my savings.

Reason 6: Cash back welcome offers are more accessible

Credit card sign-up bonuses aren’t unique to either cash back or points cards, but there are differences in how they’re dished out. With cash back, you’ll often get an accelerated earn rate right out of the gate for a limited period of time. For example, with the CIBC Dividend® Visa Infinite* card, new cardholders will earn 10% cash back on all purchases for the first four monthly statement periods (up to a maximum of $200). So, you can start earning savings right away, regardless of how much you spend.

With points credit cards, however, you’ll often have to hit a minimum spending threshold (such as $3,000 within your first three months) to unlock the bonus offer. Those spending thresholds may be hard to hit, in which case you’ll miss out on the bonus altogether. Or worse, the minimum threshold may encourage you to overspend just to qualify for the offer. That said, in truth, points cards do tend to offer larger sign-up bonuses than their cash back equivalents.

Card details

  • Annual fee: $120 (rebated for the first year)
  • Welcome offer: Get 10% cash back on all purchases for the first four statement periods (up to $200 cash back)
  • 4% cash back on eligible groceries and gas
  • 2% on eligible dining, daily transit, and recurring bill payments
  • 1% on all other purchases
  • Annual income required: $60,000 (personal) or $100,000 (household)
  • ‡ Conditions apply

Reason 7: Cash back never devalues

Cash back rewards are always worth the same.

While infrequent, points programs can be subject to policy changes and devaluations where the credit card issuer suddenly decreases or makes changes to how you redeem points, meaning you have to learn a new complicated chart or redemption process.

To play devil’s advocate

Yes, I personally prefer cash back. And for most people who just want a straightforward, no-fuss way to earn rewards on their everyday spending, cash back is the way to go.

But don’t dismiss points cards altogether, as they can be extremely lucrative. Since points values often fluctuate according to a rewards chart, it’s possible to use this to your advantage and stretch the value of your points to reap returns well above the standard 1% return per dollar. For instance, according to Ratehub’s own calculations, the value of 1 Aventura point can climb up to 1.32 cents (or more) when booking a long-haul flight within Canada, meanwhile 1% cash back will always be worth the same 1 cent no matter what and values can’t be stretched.

Some Points programs, like CIBC Aventura, also make redeeming points easier by giving you the option to book travel the way you want by either using a rewards chart (for the DIY points optimizer), speaking with one of CIBC’s full-service Aventura travel assistants to help book your itinerary for you, or book travel using points in flat increments of 100 points for $1 (1 cent per point).

If you’re a “left-brain” thinker, a regular traveller, or someone who enjoys digging into rewards charts, a points card could be the rewards card of choice.

Footnotes (+/-)

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