Mastering Cashback: A Comprehensive Guide for Canadians

Cashback programs have become a popular way for Canadians to save money on everyday purchases.

These programs offer a simple and rewarding way to make the most out of your spending, providing a percentage of your money back every time you make a purchase.

However, understanding how cashback works, where to find the best deals, and how to maximize your earnings can be challenging.

This guide will walk you through everything you need to know about cashback, making it easy for you to start saving.

What is Cashback?

Cashback is a type of reward that credit card companies, banks, and retailers offer to incentivize spending.

When you make a purchase, a percentage of the amount you spend is returned to you in the form of cashback.

This can either be credited to your account, converted into points, or given as a cheque or gift card.

Cashback can range from 1% to 5%, depending on the card or retailer, and can apply to specific categories such as groceries, fuel, travel, or entertainment.

Some programs even offer promotional cashback rates of up to 10% or more on certain purchases for a limited period.

How Does Cashback Work?

The process is simple:

1. Make a Purchase: Use a cashback credit card or shop through a cashback website or app.
2. Earn Cashback: The cashback percentage is calculated based on the amount spent and is credited back to your account.
3. Redeem Your Cashback: Depending on the program, you can redeem cashback as a credit on your statement, deposit into your bank account, or use it for gift cards or travel.

Credit card companies typically accumulate your cashback earnings over a billing cycle and either apply it automatically or allow you to choose when and how to redeem it.

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Types of Cashback Programs

There are various cashback programs available in Canada, and understanding the differences is crucial to maximizing your savings.

Here are the most common types:

1. Credit Card Cashback: This is the most popular form of cashback in Canada. Cashback credit cards offer a percentage back on your purchases, and some cards even offer higher cashback rates in specific spending categories. These cards can be an excellent option if you regularly use credit cards for your expenses.
2. Retailer-Specific Cashback: Many retailers have their own cashback programs, offering a certain percentage back when you shop at their stores or through their websites. These programs often require you to sign up or download an app to earn cashback.
3. Cashback Websites and Apps: There are several cashback websites and apps available that partner with retailers to offer cashback on your online purchases. Examples include Rakuten, Great Canadian Rebates, and KOHO. Simply shop through these platforms, and they will track your purchases and credit you with cashback.
4. Bank Account Cashback: Some banks in Canada offer cashback on specific transactions or purchases made using their debit cards. This is less common than credit card cashback, but it can still provide an additional way to save.

Benefits of Cashback Programs

• Simplicity: Cashback programs are straightforward and easy to use. Simply shop as you normally would and earn rewards on your spending.
• Flexibility: Many cashback programs allow you to redeem your earnings in various ways, such as direct deposits, statement credits, or gift cards.
• No Additional Costs: Most cashback programs don’t charge extra fees, making them a cost-effective way to save money.

How to Maximize Your Cashback

To make the most of cashback programs, follow these tips:

1. Choose the Right Card: Select a credit card that offers the highest cashback rates for your spending habits. For example, if you spend a lot on groceries, look for a card that offers higher cashback on grocery purchases.
2. Combine Cashback Programs: Stack cashback offers by using a cashback credit card along with cashback websites or apps. This way, you can double up on rewards for the same purchase.
3. Take Advantage of Promotions: Keep an eye out for promotional cashback rates, such as 10% cashback on certain categories or purchases. These promotions can significantly boost your earnings.
4. Use Automatic Payment: Set up automatic payments to avoid missing out on cashback rewards. Late payments can result in interest charges that negate your cashback earnings.
5. Track Your Spending: Regularly monitor your spending to ensure you’re getting the most out of your cashback rewards. Some cards have spending caps on cashback categories, so be aware of these limits.

Popular Cashback Credit Cards in Canada

Here are some popular cashback credit cards that offer great rewards for Canadians:

1. Tangerine Money-Back Credit Card: This card offers 2% cashback in up to three categories of your choice and 0.5% on all other purchases. It’s a great option for those who want flexibility in choosing their cashback categories.
2. Scotia Momentum Visa Infinite: Offering 4% cashback on groceries and recurring bills, 2% on gas and transit, and 1% on all other purchases, this card is ideal for those with high spending in these categories.
3. CIBC Dividend Visa Infinite: With 4% cashback on groceries, 2% on gas, transportation, dining, and recurring payments, and 1% on everything else, this card is perfect for those looking for diverse cashback opportunities.
4. RBC Cash Back Mastercard: This card provides 2% cashback on groceries and 1% on all other purchases, with no annual fee.

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How to Choose the Right Cashback Credit Card

When selecting a cashback credit card, consider the following factors:

1. Spending Habits: Choose a card that offers higher cashback rates in the categories where you spend the most.
2. Annual Fees: Some cards come with annual fees, so ensure the cashback earnings outweigh the cost.
3. Cashback Caps: Be aware of any limits on the amount of cashback you can earn in specific categories.
4. Redemption Options: Consider how you can redeem your cashback, whether as statement credits, direct deposits, or gift cards.

Cashback Websites and Apps

If you prefer shopping online, cashback websites and apps are a convenient way to earn rewards. Popular options include:

• Rakuten (formerly Ebates): Offers cashback on purchases made through their website or app from various retailers.
• Great Canadian Rebates: Another great option that provides cashback on online purchases from popular stores.
• KOHO: A prepaid card and app that offers cashback on every purchase, with bonus rates available for specific merchants.

Tax Implications of Cashback

In Canada, cashback earned from personal spending is generally considered a discount rather than income, which means you don’t have to pay taxes on it.

However, if you earn cashback through business expenses, it may be considered taxable income, so consult a tax professional if you’re unsure about your situation.

Common Cashback Pitfalls to Avoid

1. Carrying a Balance: If you carry a balance on your credit card, the interest charges may outweigh any cashback you earn, negating the benefits.
2. Overspending: Don’t be tempted to spend more just to earn cashback. Always stick to your budget and treat cashback as a bonus, not a reason to spend more.
3. Ignoring Fees: Be aware of annual fees and interest rates associated with your cashback credit card. Ensure the rewards outweigh any costs.

Conclusion

Cashback programs offer a fantastic way for Canadians to save money on their everyday spending.

By understanding how cashback works, selecting the right credit card or program, and maximizing your earnings, you can make your money work harder for you.

Whether you prefer to earn cashback through credit cards, retailer programs, or online shopping platforms, there’s a strategy out there that can help you get the most out of your purchases.

Start using cashback today, and watch your savings grow!

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