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Cash back or travel points: which card suits a renter
Renters usually can’t put their biggest bill on a card without paying a fee, which changes the maths on rewards, so here is how cash back, flexible points and airline or hotel cards compare.
Credit & rewards | Cash back card Winner | Flexible travel points card | Airline or hotel card | |
|---|---|---|---|
| How you earn | A percentage back on purchases | Points in a bank or card program | Points or miles in one loyalty program |
| How you redeem | Statement credit or deposit | Travel, transfers, sometimes statement credit | Flights or stays with that brand and partners |
| Value is | Fixed and easy to see | Variable, depends on how you redeem | Variable, can be high or low |
| Effort needed | Very little | Moderate | High |
| Annual fee | Often none, some have one | Often has one | Often has one |
| Best for | Most renters on a budget | Regular travellers who like flexibility | Loyal users of one airline or hotel |
Rewards card advice is usually written for homeowners with big monthly spending. Renters are in a different position. Your largest monthly expense, rent, often cannot go on a credit card at all, and when it can, it usually comes with a processing fee that eats most or all of the reward. That leaves your everyday spending, such as groceries, transit, phone and gas, doing all the work.
That changes which kind of rewards card makes sense. Here is how the three main types compare for a renter. We do not name specific cards, because earn rates, fees and welcome offers change often. Use this to decide which kind of card to look for, then compare current offers yourself.
Cash back cards
A cash back card returns a percentage of what you spend, usually as a credit on your statement or a deposit once or a few times a year. Some pay a flat rate on everything; others pay higher rates in categories such as groceries or gas and a lower base rate on everything else. Many have no annual fee.
Pros
- The value is easy to understand and easy to compare
- No need to learn a points program or hunt for redemptions
- Many good options have no annual fee
- Cash can go toward rent, savings or debt, which suits a tight budget
Cons
- Earn rates on everyday spending are usually modest
- Some cards only pay out once a year or above a minimum
- Higher-earning versions often carry an annual fee that only pays off with high spending
Flexible travel points cards
These cards earn points in a program run by a bank or card issuer. You can usually redeem them for travel booked through the program, and some programs let you transfer points to airline or hotel partners. The value of a point depends heavily on how you use it.
Pros
- Can be worth more than cash back if you redeem carefully for travel
- Flexibility to choose between several airlines or hotels
- Welcome bonuses can be large, if you can meet the spending requirement naturally
Cons
- Usually come with an annual fee
- Redemption values vary, and poor redemptions can be worth less than cash back
- Programs can change their rules, and points can lose value
- Meeting a minimum spend can tempt you to spend more than you planned
Airline and hotel cards
Co-branded cards earn points or miles directly in one airline or hotel loyalty program. They often come with perks such as free checked bags, lounge access or a free night, depending on the card. For someone who already flies or stays with one brand regularly, the perks can be worth more than the rewards themselves.
Pros
- Perks like free bags or a yearly free night can be valuable for frequent travellers
- Points go straight into a program you already use
Cons
- Locked into one brand and its partners
- Annual fees are common, and premium versions can be expensive
- Hard to get good value unless you travel often
- Award availability can be limited when you want to travel
A worked example for a renter
Let us take an illustrative renter who spends about $1,500 a month on a card, not counting rent: groceries, transit, phone, internet and some eating out. That is $18,000 a year.
On a no-fee card earning an illustrative 1.5 per cent on everything, that renter gets $270 a year in cash back. On a travel card with an illustrative $120 annual fee, the points need to be worth more than $390 a year, or about 2.2 per cent of spending, just to beat the free cash back card. That is possible with careful redemptions and a good welcome bonus, but it is not automatic, and it takes time and attention.
Rewards only count after you subtract the annual fee and any interest you paid to earn them.
Interest wipes out rewards
Standard purchase interest rates on Canadian credit cards are often around 20 per cent a year or higher. If you carry a balance, the interest will almost always cost more than any reward you earn. Rewards cards only make sense if you pay your statement balance in full every month.
What about putting rent on the card?
Some landlords accept credit cards, and there are third-party services that let you pay rent by card even when the landlord does not. Most charge a fee, usually a percentage of the payment. If that fee is higher than your card’s earn rate, you are paying to earn rewards. The exception some people make is using a rent payment to help reach a welcome bonus spending requirement, but even then, do the maths with the actual fee first. We have written more about this in a separate opinion piece.
Our verdict
For most renters, a no-fee or low-fee cash back card is the best place to start. It is simple, it rewards the everyday spending you already do, and the cash can go straight back into your budget. If you travel regularly and enjoy managing points, a flexible travel card can be worth more, provided the rewards comfortably exceed the annual fee. Airline and hotel cards suit a smaller group: people who already use one brand often enough to value its perks.
Whatever you choose, check the income requirements, the fee and the earn rates before applying, and avoid applying for several cards at once, since each application can show up as an inquiry on your credit report.
Will a rewards card help my credit score?
Should I cancel an old card to get a rewards card?
Is a premium card ever worth it for a renter?
End of the story · 5 min
WAbout the writer
Rosalie Fontaine
Rewards and points writer, rewards
Rosalie has kept a spreadsheet of every rewards card she has held for ten years, including the ones that were not worth the annual fee. She writes about rewards for people who would rather do the maths once than chase points forever.
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