How to Cut Through the Noise and Choose the Best Rewards Card

By Robb Engen | February 4, 2015 |

A Canadian author asked me to contribute to his latest book, which is aimed at people with 10 years or less to go until retirement. He said the target audience probably “doesn’t have enough savings set aside and most likely still has a mortgage and maybe a line of credit.”

The author wanted me to share my thoughts on which credit card points systems were best for this group.

“My guess is people like simplicity and therefore cash back sounds really good, but maybe when they are approaching retirement, possibly travelling more and have time to spend figuring out how to use the rewards cards, travel rewards might be better. I have a Visa Infinite Aeroplan but find booking flights with Aeroplan a real pain and the fees and taxes awful.”

With so many options to choose from, how do you decide which program is best? Here is my response:

How to choose a rewards credit card

Rewards credit cards are best suited for anyone who doesn’t carry a balance from month-to-month and can resist the urge to overspend just to earn points.

There are easily more than 200 rewards credit cards on the market but, unfortunately, there isn’t that one magic card that’s best for every situation. Before choosing a rewards card you need to consider your monthly budget as well as the categories where you spend the most money.

You might find that it’s a good idea to carry two or even three different credit cards to cover all of your spending categories and help boost your rewards.

Cash back

If you’re looking for a hassle-free way to earn money back on your everyday spending, look for a no-fee cash back card that pays 1 percent or better. Current examples include Amex Simply Cash, MBNA Smart Cash, and the PC MasterCard.

If you want a little more bang for your buck and you don’t mind paying an annual fee, look for a premium card that pays 2 percent or more on categories like groceries, gas, dining, or travel. Current examples include the Scotia Momentum Visa Infinite and the Amex SimplyCash Preferred.

Here are the top cash back cards, no-fee and premium.

Travel rewards

Many Canadians love to travel and earn points toward free flights and hotels. The best travel rewards cards give you the opportunity to earn points quickly, plus the flexibility to use those points however you want. That means allowing you to book flights on any airline, or stay with any hotel chain, and then applying your rewards to the charge on your credit card statement.

The best current examples include the Capital One Aspire Travel World MasterCard, CIBC Aventura, TD First Class, RBC Avion, BMO World Elite, Scotiabank Amex Gold, and the American Express Gold Card.

Aeroplan is the number one loyalty program in the country, but redeeming points can be a hassle. In fact, the number one complaint I get from readers is about the Aeroplan program. I’ve written a series of posts about the program:

Finally, if you purchase from a U.S. retailer, or travel to the U.S. or abroad, look for a credit card that does not charge a 2.5% fee to convert your foreign currency purchases back into Canadian dollars. The best current examples are the Amazon.ca Rewards Visa and the Marriott Rewards Premier Visa.

Final thoughts on choosing a rewards card

I use the Scotia Momentum Visa Infinite to earn cash back on grocery and gas spending, and then use the Capital One Aspire Travel World MasterCard for everything else. I also keep the Amazon.ca Rewards Visa in my wallet for any travel or purchases outside of Canada.

Read here about how I earned over $1500 in credit card rewards last year.

One thing to keep in mind is that many premium cards such as Visa Infinite and World or Elite MasterCard are only available to high income earners ($60,000+ annual personal income or $100,000+ annual household income).

And again, beware of hidden fees like foreign currency conversion, which can cost more than the rewards that you’ll “earn” on any purchases and travel outside of Canada.

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Posted in Rewards Cards and tagged Rewards Cards

7 Comments

Jodie on February 4, 2015 at 2:37 pm

For international spending on dining, am I best to get a no foreign exchange fee card or simply use my Scotiabank Gold Amex which gives me 4% back? Thanks.
- Robb Engen on February 4, 2015 at 4:28 pm
  
  Hi Jodie, I’d err on the side of caution and use the no foreign exchange card on the off chance that the restaurant doesn’t accept Amex or in case that particular restaurant somehow doesn’t fall into the “dining category” according to Scotia and Amex.
  
  Play it safe and use the Amazon card, which gives 1% cash back plus saves the 2.5% forex conversion fee.
  - Jodie on February 4, 2015 at 8:17 pm
    
    You make a good point. Thanks!
Mary R on February 5, 2015 at 5:18 am

We use the RBC US$ credit card which gives you points and pay for everything in US$.

We would be interested in knowing which card provides the best insurances.
- Robb Engen on February 5, 2015 at 4:12 pm
  
  Hi Mary, I’ll try and do up a review of the cards with the best insurance features.
Joel on February 5, 2015 at 11:18 am

Hi, I see very little discussion on the RBC Avion VISA and how this travel reward card compares to others. Assuming it is even worth considering could you please do an article on this topic?
Thanks, Joel
- Robb Engen on February 5, 2015 at 4:17 pm
  
  Hi Joel, it’s been a while since I’ve reviewed RBC’s Avion card. I wrote this piece for the Toronto Star comparing Avion with Aerogold – http://www.thestar.com/business/personal_finance/2013/05/30/aerogold_vs_avion_two_travel_credit_cards_compared.html
  
  In the Rewards Cards blog’s annual ranking of travel rewards cards, RBC’s Avion is classified as a “Hybrid” card (combination airline or hotel, and travel points) and it ranks #2 behind the American Express Gold Rewards card.