Using one of the top cash back credit cards is a great way to earn rewards for your everyday spending. But you’ll need the discipline to pay off your balance in full every month or you’ll be trading 1 or 2 percent cash back for 20 percent interest.
You’ll need to figure out how much you spend every month in order to find which cash back credit cards are best for your situation.
Some annual fee credit cards offer generous rewards and sign-up bonuses, but unless you have a good income and spend at least $2,000 a month on your card, you’re better off with a no-fee rewards card.
MBNA’s Smart Cash Platinum card was the top cash back credit card for a number of years, but recent changes to this card have reduced the amount of cash back you can earn, so you’ll need to take a look.
I had used MBNA Smart Cash for about two years and collected close to $1,000 in cash back rewards. But the recent changes left me disappointed with the program and so I did some research to find a better card.
Top Cash Back Credit Cards 2013
I looked at 10 of the top cash back credit cards and compared them based on spending $12,000 a year and $24,000 a year to see which was best.
| Cash Back Credit Cards | Cash back on $12,000/year* | Cash back on $24,000/year** |
| Scotia Momentum Visa Infinite | $225 | $465 |
| Capital One Aspire Cash World | $280 | $460 |
| Scotia Momentum Visa | $165 | $333 |
| RBC Cash Back | $168 | $312 |
| Costco True Earnings Card | $138.50 | $294.50 |
| MBNA Smart Cash Platinum | $240 | $270 |
| PC MasterCard | $125 | $245 |
| TD Rebate Rewards | $120 | $240 |
| CIBC Dividend Card | $101 | $221 |
| BMO Cash Back World | $71 | $221 |
*based on spending $400 a month on groceries and $100 a month on gas
**based on spending $600 a month on groceries and $200 a month on gas
The Capital One Aspire Cash card is best if you spend around $1,000 a month. This no-fee cash back credit card gives you 1 percent cash back and you’ll earn an extra 50 percent bonus on your card anniversary, effectively earning 1.5 percent back on all your spending. Plus, you’ll get a generous $100 bonus with your first purchase.
If you’re a big spender then the Scotia Momentum Visa Infinite is worth a look. This card comes with a $99 annual fee, but gives you 4 percent back on groceries and gas, plus 2 percent back on pharmacy purchases and recurring bill payments.
Use these top cash back credit cards together to maximize your cash back from each spending category.
For example, put all your groceries, gas and pharmacy spending, plus your recurring bill payments on the Scotia Momentum Visa Infinite. Put everything else, like travel and clothes, on Capital One Aspire Cash.
With this approach, you’ll earn $625 cash back when you spend $24,000 in the first year, which is 34 per cent more than you’ll get using the Scotia card on its own.
Please note that $60k personal income or $100k household income is a minimum requirement for each of these cash back credit cards.
One of the most common complaints about using a credit card is that you’ll end up spending more than you need to just to earn more points or cash back. That’s why I use a budget to set goals and keep my expenses under control.
But I don’t rush home to enter the receipts into my budget after every purchase. I pay for everything using a credit card and then look at the monthly statements to track expenses in various spending categories.
Related: Best Financial Tip – Spend Wisely
Using A Credit Card To Track Expenses
This approach has three benefits. First, it eliminates the need to use a 3rd party budgeting tool like Mint to track your everyday spending. Just review your online statement two or three times a month and then compare that with your budget.
Second, it’s great for cash flow. Since you’re paying for everything with a credit card you’re able to take advantage of a 21 to 30 day interest free grace period before the balance is due. This is a good way to keep and maintain a minimum balance in your chequing account and waive any monthly fees.
Third, you can maximize your credit card rewards by figuring out how much you spend each month and in which categories you spend the most money. If you spend a lot on groceries and gas, you can look for a cash back credit card that rewards you more for spending in those categories.
Review Your Spending
When I looked back at my expenses this year I found that my credit card bill averaged about $3,050 a month. Here’s how that breaks down into specific spending categories:
- Groceries – $625/month*
- Costco – $375/month*
- Gas – $155/month
- Recurring bill payments – $275/month
- Dining out – $250/month
- Prescriptions – $50/month
- Other – $1,320/month
*Note this includes things like diapers, cleaning supplies and household supplies
Look At Your Options
I’ve been using the MBNA Smart Cash MasterCard for all of my non-Costco purchases. I was able to earn about $500 cash back with this card because I had another six months of 5% back on groceries and gas when I upgraded to the Smart Cash World MasterCard.
Related: How To Use Your Non-Amex Rewards Credit Card At Costco
MBNA reduced the amount of cash back you could earn starting December 1st, 2012, so now is a great time to review my options.
If I continue using the Smart Cash World MasterCard next year – assuming the same spending level – I’ll earn $369 cash back ($350 because you need a minimum of $50 to get a cheque).
My best option would be to use the Scotia Momentum Visa Infinite. That’s because you can earn 4% back on groceries and gas, plus 2% back on recurring bill payments and prescriptions.
With the Momentum Visa Infinite, I’ll earn $535.80 after subtracting the $99 annual fee. That’s 45% more than I’d get using the Smart Cash card!
Do you use your credit card to help track your expenses?