Are cashback cards worth it?

If you don’t travel much, or you don’t want to have to think too much about it, a cashback credit card could be right up your alley,

A cashback credit card sounds great in theory: spend on daily needs like gas and groceries, and get money back every year. But the cards can have high fees and punitive interest rates. Are they worth it?

Personal finance expert Barry Choi says they’re a good choice if you don’t travel much, or you like the simplicity of not having to track and redeem points. But there are a few caveats.

For starters, most cashback cards have interest rates of 19 per cent or more. If you carry a balance for more than a few months, you’ll pay more in interest than you’ll get back in cash. As well, the fees for cashback cards can be $100 a year or more, so they don’t make sense unless you tend to charge more than $1,500 a month on purchases.

If you charge $2,000 a month or more, you can get $300 or $400 back in cash each year, and some, like the Scotia Momentum Visa Infinite, come loaded with extras like trip cancellation and rental car insurance.

Not all cashback cards have fees though — one of the most popular no-fee options out there is the Tangerine MoneyBack card, Choi says, which allows you to choose specific categories for your cash back purchases.

“You can kind of create a portfolio of cards where you maximize your cash back,” Choi says. “If you understand how the programs work, you can get a lot of value.”