5 things to consider when choosing a cash back credit card
Sponsored By
CIBC
Cash back earn rates aren’t the only thing to look at when figuring out which cash back credit card is best for you.
Sponsored By
CIBC
Cash back earn rates aren’t the only thing to look at when figuring out which cash back credit card is best for you.
When it comes to choosing a cash back credit card, many people compare earn rates and leave it at that. We get it: Earning as much money as possible back on your purchases is kind of the point, but there are other considerations to take into account to truly choose the right cash back credit card for you. In this article, using the cards the from the CIBC Dividend Visa line as examples, we’ll dig into five other features to weigh when choosing a cash back credit card.
CIBC Dividend Visa Infinite | CIBC Dividend Platinum Visa | CIBC Dividend Visa for Students | CIBC Dividend Visa | |
Bonus rewards categories | 4% cash back on gas, EV charging and groceries; 2% on transportation, dining and recurring bills; and 1% on everything else | 3% cash back on eligible gas, EV charging and grocery purchases, 2% on transportation, dining and recurring bills; and 1% cash back on all other purchases | 2% cash back on eligible grocery purchases, 1% cash back on eligible gas, EV charging, transportation and dining purchases and up to 0.5% cash back on all other purchases | 2% cash back on eligible grocery purchases, 1% cash back on eligible gas and EV charging, transportation and dining purchases and up to 0.5% cash back on all other purchases |
Annual fee | $120 | $99
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$0
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$0
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Interest rate
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20.99% for purchases and 22.99% for cash (or 21.99% for Quebec residents) | 20.99% for purchases and 22.99% for cash (or 21.99% for Quebec residents) | 20.99% for purchases and 22.99% for cash (or 21.99% for Quebec residents) | 20.99% for purchases and 22.99% for cash (or 21.99% for Quebec residents) |
Minimum income requirement | $60,000 individual, or $100,000 household | $15,000 household | None listed | $15,000 household |
Welcome offer
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You can earn 10% cash back welcome bonus of up to $250 (first 4 statements). Offer not available to QC residents. Terms and conditions apply. | You can Earn 10% cash back welcome bonus of up to $250 (first 4 statements). Offer not available to QC residents. Terms and conditions apply. | Earn $50 in cash back after you make your first purchase within the first 4 months. Offer not available to QC residents. Terms and conditions apply. | Earn 5% cash back for the first 4 statements on net purchases of up to $2,000 (up to $100 cash back). Offer not available to QC residents. Terms and conditions apply. |
All cash back credit cards have a base earn rate that’s a percentage of your purchase that you’ll get back no matter what. This is often between 0.5% and 1%—$0.50 to a $1 for every $100 you spend. Bonus categories refer to types of purchases where you’ll be rewarded at higher rates.
How are bonus categories determined? Glad you asked. Credit card processors like Visa categorize retailers into different types, so each of your purchases falls into a specific spending category. For example, if you buy groceries with a Visa card at a large grocery chain, the purchase may likely fall under the “groceries” category with a bonus rate. However, if you buy groceries at a big box store that sells groceries, the purchase may be part of the “everything else” category, rewarding you with the base rate. There’s nothing you can do about how the spending categories work, but you’ll maximize your rewards if you educate yourself and shop with the right card accordingly.
Bonus categories are the key to juicy cash back rewards. And you’ll want to choose a card that matches your spending habits. For example, say you’re a daily commuter with a family of four. Groceries and gas will likely be big ticket monthly spends so nabbing a card that handsomely rewards both makes sense. The CIBC Dividend Visa Infinite card earns you 4% back in both categories, which, at a monthly spend of $1,000 in eligible groceries and $400 in eligible gas monthly may get a return of $56 per month, or $672 annually. The CIBC Dividend Platinum Visa has a slightly lower earn rate of 3% ($42 back monthly and $504 annually), but it also has a lower annual fee. (More on annual fees below.) If those are big spending categories in your household, the Dividend Visa Infinite could be the better card for you.
If earning money is the point of a cash back card, it makes sense to do the math when it comes to an annual fee.
As we saw above, the CIBC Dividend Visa Infinite credit card could earn a daily commuter with a family of four around $672 annually on just eligible groceries and gas. The card has an annual fee of $120, which leaves a net positive earn of $552. If this same consumer used the no-annual-fee CIBC Dividend Visa, they’d earn $336 annually (at 1% on gas and transportation). In this case, the card with the fee makes more sense, but that’s not always the case. Students, in particular, may want to avoid paying an annual fee, which is entirely possible with the CIBC Dividend Visa for Students. Not in school? You can earn cash back with no annual fee with the CIBC Dividend Visa.
It’s always good practice to pay your credit card bill in full every month. That said, should you fall behind and have to carry a balance you’ll be charged interest. Most cash back credit cards have the same or similar interest rates of around 20.99%. For example, all four of the CIBC Dividend Visa cards carry the same rate: 20.99% for purchases and 22.99% for cash (or 21.99% for Quebec residents).
If you get into a position where you’re carrying a balance for more than one month, it’s a good idea to move your debt load over to a lower-rate card so you will incur fewer charges while you pay it off. CIBC Select Visa, for example, has an interest rate of 13.99%.
Some cards, particularly those with impressive perks and bonuses, are available only to those who meet certain income requirements. The assumption is that people who make higher incomes will have less trouble paying down their debt, so they represent less of a credit risk to the banks. Luckily, there are cash back credit cards available to people of almost all means. The CIBC Dividend Visa for Students, for example, has no income requirement, while the higher-end CIBC Dividend Visa Infinite requires a minimum annual income of $60,000 individually or $100,000 for the household.
Banks frequently run attractive (and lucrative!) welcome offers to attract new clients. Keep an eye out for accelerated earn rates for new customers. If you time your application right, you can get a little (or a lot) more back during a promotional period.
Cash back cards are all about making money, but earn rates are only the beginning of a consideration list. When you run the math, it’s easy to see that at least five other factors could, and should, factor into your final choice.
This is a paid post that is informative but also may feature a client’s product or service. These posts are written, edited and produced by MoneySense with assigned freelancers.
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