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From making the most of tiered rates and shopping categories to redeeming your money, we break down how cash back credit cards work.
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You know what they say: Cash is king. Whatever you want—be it travel, merchandise, services or anything else—you know you can get it with cash. That’s why cash back credit cards are so popular. They let you earn back money just by using the credit card for your everyday purchases (with some exclusions). Whether you’re after a premium card loaded with perks or a simple student card, there are so many types out there that you’re sure to find one that meets your needs. If you’ve ever wondered how cash back works, you’ve come to the right place.
When you get a cash back card, you’ll earn a percentage of your purchases back in cash. How much you earn, and on which kind of purchases, depends on the card you have. Take a look at these cash back cards from CIBC:
| Card | Rewards | Base rewards | Annual fee |
|---|---|---|---|
| CIBC Dividend Visa Infinite | 4% on cash back on eligible gas, EV charging and grocery purchases, 2% on dining, transportation and recurring bills | 1% on all other purchases | $120 purchases 20.99%, cash advances 22.99%, balance transfers 22.99% |
| CIBC Dividend Platinum Visa | 3% cash back on eligible gas, EV charging and grocery purchases, 2% cash back on eligible transportation, dining purchases and recurring payments | 1% on all other purchases | $99 purchases 20.99% cash advances 22.99% balance transfers 22.99% |
| CIBC Dividend Visa | 2% cash back on eligible grocery purchases, and 1% cash back on eligible gas, EV charging, transportation and dining purchases | 0.5% on all other purchases | $0 purchases 20.99% cash advances 22.99% balance transfers 22.99% |
| CIBC Dividend Visa for Students | 2% back on eligible grocery purchases, and 1% cash back on eligible gas, EV charging, transportation and dining purchases | 0.5% on all other purchases | $0 purchases 20.99% cash advances 22.99% balance transfers none |
As you can see, these cards offer different bonus categories for some purchases. This is fairly typical, although there are some credit cards that offer the same rate across the board. With the cards above, all four have bonus categories and base rewards. There are limitations and conditions to each of the categories; you can find full details at cibc.com.
One thing to keep in mind with any cash back card is that it pays to know exactly how purchases at different retailers are categorized. For example, you may know Metro is considered a grocery spend by Visa, but you collect big there with any of your purchases from there, too. That includes services, like food delivery and products from the pharmacy aisles, too.
Credit card companies often offer a second-tier earn rate that’s slightly less than the bonus categories but more than the base, to make their cards more appealing and useful. This is also a way that cards can better fit people with different spending habits and income levels.
For example, take a look at the CIBC Dividend Visa credit card. It offers 1% back on eligible gas purchases. The point here is to be strategic about the types of purchases you make to maximize your cash back. Even if your purchase doesn’t fall into a category with an accelerated earn rate, you’ll still get money back. With the CIBC Dividend Platinum Visa and the CIBC Dividend Visa Infinite, the base rate is 1%, while the CIBC Dividend Visa and the CIBC Dividend Visa for Students cards both offer 0.5%.
Credit card companies handle cash back redemption procedures differently. The least flexible cash back cards redeem automatically in fixed intervals, either once per year or once a month. Others, like these CIBC cash back cards, let you access your cash on-demand (once you reach a minimum of $25 in earnings) in addition to the annual payout in January.
| Rewards | First-year rebate | |
|---|---|---|
| CIBC Dividend Visa Infinite | You can earn 15% cash back welcome bonus of up to $300 (first 4 statements). | Yes, worth $200 |
| CIBC Dividend Platinum Visa | You can earn 15% cash back on all purchases (up to $300 for the first 4 statements). After that, the earn rate becomes 3% on eligible gas and grocery purchases. | Yes, worth $99 |
| CIBC Dividend Visa | Get 5% cash back on all purchases up to $2,000 in the first four statements ($100 value). | n/a |
| CIBC Dividend Visa for Students | You can earn $60 cash back when you make your first purchase within your first four months of having the card. | n/a |
Welcome offers are one-time or temporary promotions designed to entice new applicants, and the bonuses can be very lucrative. Frequently, cards that have an annual fee like the CIBC Dividend Visa Infinite and the CIBC Dividend Platinum Visa will waive the first year, saving you $120 or $99 respectively. Accelerated rewards, in this case, incentivize you to spend by offering an outstanding return. With these two cards new cardholders will receive 10% back on all spend (up to $300). Even the CIBC Dividend Visa for Students returns $60 on the first purchase, no matter the purchase amount.
Cash back cards can be a simplest and straight-forward way to make your everyday spending do double-time. A flat, across-the-board rate can be easy to understand, but sometimes those bonus categories can help you earn more. If your shopping habits mirror the shopping categories on a cash back card, it’s a definite win. But it is worth knowing the tiered earning rates of your credit, as well as the caps. Also, some cash back categories aren’t as intuitive as they might seem. Just because a big box store sells groceries, it might not be on the credit card list for that bonus category. You may want to check to see if it’s worth changing retailers and your bottom line. You also may be surprised by the retailers on the lists, too! With a little bit of strategy, you can earn back your annual fees and more.
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