Cashback vs. Travel Rewards Credit Cards: A Comprehensive Guide for Canadians

One of the biggest choices you’ll have when choosing a credit card is whether you should pick a points card or a cashback card.

Cashback is generally more straightforward and predictable in its redemption, while some points programs offer broader flexibility through transfer partners.

The final verdict, as always, relies on what kind of spender you are.

To determine which card type suits you best, keep reading.

Points vs Cashback

To truly grasp which card type is most beneficial for you, you need to understand the difference between points and cashback.

Cashback Credit Cards

When you choose a cashback credit card, you’re signing up for a rewards program that puts money back into your pocket, commonly via statement credits. 

Cashback cards return a percentage of the money you spend on either all purchases or on specialized earn categories, depending on the card. For example, if you spend $100 on a grocery run and your cashback card earns you 2% cashback on groceries, you’ll get $2 back on that purchase. Otherwise, your card might earn you a flat rate on all eligible expenses. At first, these return rates might seem minimal, but they add up with frequent card use!

Cashback payouts vary from card to card. Sometimes, you’ll be able to cash in your cashback at any time. Other times, you’ll need to wait until you’ve collected enough cashback to initiate a withdrawal. Some cards only allow you to deposit your cashback once a year. If you're curious about your card’s withdrawal policies, check out our credit card reviews located at the bottom of each card included in our credit card finder tool. These reviews provide a comprehensive breakdown of how you can earn and redeem your cashback on each card.

Ultimately, a cashback credit card is perfect for spenders who want a simplified redemption system with few limitations.

Cashback is typically the most straightforward and flexible redemption option. That said, some points programs, like Amex Membership Rewards, also offer decent flexibility.

Points Credit Cards

Points credit cards, on the other hand, are a bit more complex.

Like cashback cards, your points card will earn you rewards on specialized earn categories like groceries, gas, dining, or travel. The points you earn belong to a specific loyalty program associated with your card. Each loyalty program has its own redemption categories. In other words, the loyalty program pre-determines what you can put your points towards. For example, your card might come with travel, entertainment, gift cards, and merchandise as its redemption categories. This means you can apply your earned points to any of those qualifying expenses. 

But wait, there’s more.

The value of your points will vary based on the redemption category you choose. For instance, your points might be more valuable when used towards travel than, say, merchandise.

To help you cut through all of the confusion, we put together a points calculator page that lets you input how many points you have within a participating loyalty program and review which redemption options are the most valuable. This page also explains each loyalty program and redemption category in detail.

In many cases, travel is the highest-value redemption option, allowing spenders to use their points to cover flights, hotel stays, and experiences abroad. With this in mind, points credit cards are often a wiser choice for frequent travellers.

See more in our best travel credit cards in Canada post. This article contains points and cashback competitors, but based on trip-oriented value, coverage, and perks, points cards tend to take the lead. Here, you’ll find top picks like the Scotiabank Passport Visa Infinite Card or the ever-impressive American Express Cobalt Card.

Pros and Cons of Travel Points and Cashback

Now that we’ve overwhelmed you with information on each card type, it’s time to regroup and review their differences – paying close attention to their respective pros and cons.

How to Choose Between Travel Points and Cashback

Finally, let’s take what we’ve learned about points and cashback credit cards, as well as how they stack up against each other, and decipher which card type is the right fit for you.

When making this big decision, always consider:

1. Your spending habits. We cannot stress this enough! How you spend your money is the biggest determinant of which credit card you should apply for. Your financial patterns should be complemented by a card’s earn categories, coverage, and perks. When deciding between a cashback card and a travel rewards card you’ll want to determine whether you spend more on travel than you do on everyday purchases.
2. How much you’d like to spend on annual fees. As mentioned in the comparison table, travel rewards cards tend to have higher annual fees – especially if you’re opting for a premium travel card like the American Express Platinum Card or the Scotiabank Passport Visa Infinite Privilege Card.
3. How often you travel. If you don’t travel that much, then the decision is easy – opt for a cashback card that complements your spending habits.
4. How much flexibility you want out of a rewards program. If you don’t want to be tied down to a set list of redemption categories (especially those pertaining to travel) then you might prefer the flexibility of a cashback card.
5. How much you want to collect up-front. As stated before, travel rewards cards tend to provide some of the biggest sign-up bonuses. 

Conclusion

Whether or not you should apply for a cashback credit card or a travel rewards credit card really depends on your spending habits.

If you travel frequently and enjoy a premium perk or two, a travel rewards card is a good choice.

Alternatively, if you don’t travel too often, or you want to optimize everyday spending and an uncomplicated redemption system, then cashback is best.

But who says you have to pick one over the other?

That’s right! Sometimes, the smartest way to reward your spending is to supplement an everyday cashback credit card with a premium travel rewards card. 

Why choose when you can have both?

Frequently Asked Questions (FAQ)

What’s the difference between cashback and points credit cards?

The main differences between a cashback credit card and a points credit card are as follows:

• Cashback credit cards return a percentage of your spending, typically as a statement credit (unless you choose to put the return towards a savings or investment account – depending on your institution). Cashback credit cards are also more straightforward and flexible.
• Points credit cards earn you points or miles on every purchase that you can later put towards redemption categories like travel, entertainment, gift cards, or merchandise. With points credit cards, your redemption opportunities depend on the loyalty program.

Which type of credit card is best for those who don’t travel often?

If you don’t travel much, a cashback credit card that optimizes your everyday spending is usually superior to a travel rewards card. Cashback credit cards offer an easier way to earn rewards on your most common expenses and since redemption is simply cash – it’s much less complicated. 

Are travel rewards credit cards worth the higher annual fee?

Travel rewards credit cards are worth a higher annual fee if you intend to optimize the card’s rewards and perks to their full extent. Travel rewards credit cards generally come with travel insurance, substantial welcome bonuses, trip-oriented rewards, and sometimes, exclusive perks like no foreign transaction fees or airport lounge access. However, if you don’t travel much, you probably won’t get enough value out of your travel card to justify the cost.

Can I use cashback and travel rewards credit cards at the same time?

Yes! You can absolutely supplement an everyday cashback credit card with a travel rewards credit card. In fact, if you’re a frequent traveller, this is a very strategic way to optimize your spending.

With a credit card from each category, you’ll be able to collect rewards on common purchases like groceries and gas and you’ll be able to offset the cost (or partial cost) of plenty of trips.