The advantages and disadvantages of a cashback credit card
The biggest advantage of a cash back credit card is that there is very little strings attached to your rewards. At the end of the year you will get a statement credit equal to the amount of cashback earned throughout the year.
The only downside to cash back is that your account will only be credited with your cashback once a year and your account must be in good standing in order to be eligible for the cashback. Another possible downside an accountant friend mentioned is that if you are regularly using your credit card for business purposes and your employer reimburses you for your expenses, than you are suppose to declare your cashback as taxable income. A way to keep the credit card rewards non-taxable is to earn reward points instead, and make sure you do not convert them to cash. Doing it this way, you won't need to declare the rewards as income.
Who should apply for a cashback credit cards?
If you have good credit and are responsible enough to pay your credit card bill, then you should apply for a cash back credit card. You can reduce the costs on your purchases by as much as 4% on the best cashback credit cards in Canada.
Who shouldn't apply for a cashback credit card?
Almost no one. Unless you have no or bad credit, you should apply for a cashback credit card. You might also may not want to apply if your primary motive is to find a credit card to lower your interest rate. Most credit cards have an interest rate of 19.99%.
FAQ on Cashback Credit Cards
When do I get my cashback?
Usually once a year and more often than not it will be on your anniversary date.
I am only planning of using my credit card once in a while, is there a no-fee cash back card that would be better for me?
Most Canadian banks will have an entry level cashback credit card with no fee attached. If you will be spending less than $325 a month on grocery stores, gas stations, drug stores and recurring bills, then you will be better off getting a low end cash back card.
Can I use the cashback early to pay this month's credit card bill?
Generally, no. Most of the time, the cashback will only be released once a year as a credit on your balance and only if your account is in good standing. Although, recently more and more cashback cards are letting you release your cashback throughout the year.