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Taking a Look at Cashback Credit Cards

Most average families have gotten to the point where they are really scaling up their efforts on cutting back their expenses and looking for innovative ways of making a few extra dollars or savings.  When there is something free being offered a lot of people tended to opt for it.  A good example of this is air miles and one of the latest fads is the cashback credit cards.

At one time individuals would apply for a credit card based on whether they felt they were going to be approved or not and one where they could use the simplest methods for applying.  Now individuals are looking much closer at what the credit card offerings are.  This not only includes those that will offer the lowest interest rates with no administrative or membership fees, but also ones that are offering some sort of cashback incentives.

Many opted for the American Express at one point with the true earnings card but that now has been discontinued. These can be really advantageous if you are well focused on being smart with your credit card activity. This means using your credit card for your everyday purchases but making sure that you pay the balance off each month. This is a problem for a lot of people and they may start out with these intentions but they soon forget about them.

Some examples of cashback credit cards are the Scotia Bank Momentum Visa Infinite card which will reward you for purchases that you make on a daily basis.  In some cases you can receive a 4% cash back on your gas and grocery store purchases, and perhaps a 2% cash back on payments that you are making on a regular basis or on drug store purchases.  For the rest of your purchases it will range around a 1% cash back. One of the additional benefits is the 21 day grace period that you have before you start racking up the interest.  While it may be a good card you’re still looking at a substantial interest of 19.99% on your purchases and 21.99% if you take cash advances.

While these seem like small percentages they really can add up over a period of a year for example if your average expenditure on your fuel for your vehicle is about $80 a week that works out to $4160 for the year and if you’re going to get 4% back on that you’re looking at about $167. That’s just in one area where you can save some money but again this is provided that you use your credit card wisely and make your payments fully at the end of the month.

There are several other credit card offerings that come with lucrative incentives and they can vary. If you are in the mode for new credit card then really take the time to shop around well to see what all the features are as a well as what the repercussions are for that particular card and then do some comparisons.

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Sam Seidman, CPA, CA, LPA
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Email: sam@torontoaccountant.ca

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