Start Here: Credit Card Rewards for Beginners in Canada

This page is for anyone new to credit card rewards. Read it top to bottom in about ten minutes, and you will know how rewards work, what to avoid, and how to choose your first rewards card. Unfamiliar words link to plain-language definitions in our glossary.

1How credit card rewards work

Every time you pay with a rewards card, the card gives a little back. How much depends on the card’s earn rate, which is shown either as a percentage (cash back) or as points per dollar (points cards).

Most cards pay a higher rate in a few bonus categories, such as groceries or gas, and a lower base rate on everything else. Which category a purchase falls into is decided by the store’s merchant category code, not by what you buy.

2The golden rule: pay in full, every month

Rewards are a small discount on spending you were going to do anyway. Interest wipes that out fast. Many Canadian credit cards charge around 20% a year on balances you carry, while rewards are typically 1% to 4%.

In Canada, new purchases get an interest-free grace period of at least 21 days when you pay your full statement balance by the due date. Set up an automatic full-balance payment from your bank account so you never miss it.

3Cash back or points?

Cash back is simple: you see exactly what you earn, and you can use it on anything. Points can be worth more, but only if you redeem them well, usually for flights. The way to compare them is cents per point: one cent per point is about the same as 1% cash back.

• Choose cash back if you rarely travel, want something simple, or would redeem points for statement credits or gift cards anyway.
• Choose points if you fly at least once a year, are willing to learn how a program like Aeroplan works, and will book with your points rather than let them pile up.

Our cash back vs. travel points guide runs the full comparison for three household budgets.

4Choose your first rewards card

Work through these five questions in order:

1. Where do you spend the most? Look at a few months of statements. Groceries, gas, dining and recurring bills are the common bonus categories.
2. Is an annual fee worth it for you? A fee card only makes sense if its extra earnings beat a no-fee card. Work out the break-even point first.
3. Do you meet the income requirement? Premium cards list a minimum personal or household income. Check before applying, since each application adds a hard inquiry to your credit file.
4. Will stores accept it? Not every store takes American Express, so keep a Visa or Mastercard as well. Costco, for example, takes only Mastercard credit cards. See which stores accept Amex.
5. Do you spend in other currencies? Most cards add a foreign transaction fee of about 2.5% on foreign-currency purchases. If you travel or shop abroad often, a card without one can save more than its rewards earn.

5Get the most from your card

• Put your everyday spending on the card, then pay it off in full.
• Move regular bills, like your phone plan or streaming, to automatic payments on the card if it rewards recurring payments. Our recurring bills guide shows which cards do.
• Check your first statement at a new store to confirm the rate you earned.
• Know your card’s spending caps so you don’t keep using a card that has dropped to its base rate.
• Redeem regularly. Points can lose value over time, and some programs expire inactive points.
• Treat a welcome bonus as a bonus, not a reason to spend more.

Where to go next