Card Reward Points vs. Cash Back: Which Pays More?
- William Brazeau
- Jun 14
- 3 min read
Updated: 4 days ago
Credit card rewards have evolved from simple incentives to full-blown perks that can shape the way you spend, save, and even travel. But for many Canadians, the core question remains: Are you better off chasing reward points or sticking with straightforward cash back?
Let’s break down both options and see where you’ll get the most value for your money.
Understanding Card Reward Points
Reward points programs—think Aeroplan, Scene+, or Amex Membership Rewards—promise value in exchange for your everyday spending. The pitch is simple: collect points as you use your card, then redeem them for travel, merchandise, gift cards, or even statement credits.
Pros:
Potential for outsized value: Redeeming points for travel, especially during promotions or with the right transfer partners, can give you returns far above the average 1 cent per point.
Access to exclusive perks: Priority boarding, lounge access, free hotel stays, and more.
Motivation to save for bigger goals: Points can fund vacations or expensive purchases you might otherwise skip.
Cons:
Complexity: Redemption rules can be confusing and may change without notice.
Devaluation risk: Loyalty programs sometimes reduce the value of points, so what’s worth $100 in travel today might be $80 next year.
Blackout dates and restrictions: You might not always get the reward you want when you want it.
The Case for Cash Back
Cash back cards cut through the noise. You spend, you earn a percentage back—usually as a statement credit or direct deposit.
Pros:
Simplicity: No need to study reward charts or hunt for deals. You always know what you’re getting.
Immediate utility: Cash can be used for anything, not just flights or hotels.
Transparency: Rates are clear—typically between 1% and 4%, sometimes higher for specific categories (like groceries or gas).
Cons:
Fewer “wow” perks: No first-class upgrades or luxury hotel nights.
Lower potential upside: The earning ceiling is predictable. There are rarely any surprises.
What Actually Pays More?
This is where the math comes in. Let’s compare two common scenarios:
Scenario 1: Travel Points Card
Annual fee: $120
Base earn rate: 2 points per $1 spent (worth about 1 cent per point on average)
Annual spend: $20,000
Total points earned: 40,000
Approximate value: $400 (assuming 1 cent per point)
Minus annual fee: $280 net value
Scenario 2: Cash Back Card
Annual fee: $0
Flat earn rate: 1.5%
Annual spend: $20,000
Total cash back: $300
Minus annual fee: $300 net value
In this example, a cash back card edges ahead on pure net value, especially if you want flexibility and don’t want to deal with fees. But if you can extract more value per point (for example, by redeeming for premium travel), a points card could outpace cash back, even after accounting for the fee.
Other Factors to Consider
Category spending: Some cards offer boosted rewards for groceries, dining, or gas. If your spending lines up with those categories, your effective earn rate increases.
Sign-up bonuses: Introductory offers can tip the scales in favour of either type, but these are one-time perks.
Your travel habits: If you travel often, especially internationally, points can offer perks cash can’t match.
How you redeem: Only redeeming points for travel deals (instead of merchandise or gift cards) tends to maximize value.
Bottom Line
Cash back wins on simplicity and reliability. Points cards can pay more, but only if you maximize redemptions and don’t mind the added complexity. The best choice depends on your lifestyle, spending habits, and tolerance for tracking programs and promotions.
If you want predictable returns and flexibility, go with cash back. If you enjoy squeezing every last dollar out of your rewards—especially for travel—points programs could be your ticket to greater value.
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