Cash back or points: which credit card reward pays more, and a cash back calculator

Two numbers help show which reward pays more. The first is what the points a card earns per dollar are worth in the redemption actually used, set against the cash back rate. The second, for a card with an annual fee, is how much spending it takes before the extra rewards cover the fee, as the worked comparison shows. The break-even puts a number on the first test, and the calculator runs the second on your own amounts. Cash back cards are ranked on best cash back credit cards, and points cards on best rewards cards.

What is cash back, and how is it paid?

One issuer describes it this way: A cash back credit card gives you back a percentage of eligible purchases as cash back. Some cash back credit cards offer more cash back on certain purchases, while others offer a flat rate across every purchase type.

On one issuer’s card, the higher grocery rate stops at a yearly cap: 3% cash back on groceries, on the first $15,000 in annual purchases in that category, then 1%.

What counts in a category is up to the issuer. One issuer’s terms define grocery purchases by the card network’s merchant code: Purchases at merchants the Visa network classifies as Grocery Stores and Supermarkets (MCC 5411). Another issuer counts stand-alone grocery stores and names the kinds of store that don’t count: Stand-alone grocery stores in Canada. Superstores, wholesale clubs, alcohol retailers and general merchandise retailers do not qualify because grocery is not their primary business.

The way cash back is paid differs from card to card. One issuer credits it once a year: Cash back is applied as a credit to the account once a year and appears on the statement issued in September. Another lets the cardholder choose between on demand and once a year: Cash Back Dollars are redeemed as a credit to the account, either on demand once the Cash Back Dollar balance is at least $25.00, or annually (credited each January) with no minimum balance. Redemption is not automatic. A third issuer’s card states: Cash back can be redeemed at any time for as little as $1.

Card by card, the caps and payout terms are on the cash back ranking. Welcome offers are left out here; how they work, and where to confirm a card’s current offer, is on welcome offers.

What is a point worth?

A point’s worth depends on what it is spent on. One issuer says of an airline program’s points that they have no cash value but are redeemable under the Aeroplan program for flights and other rewards, and that the value of what they buy will vary depending on a range of factors including the type of reward issued.

For those points spent on flights, the same issuer gives a figure with its basis: it says the majority of current cardholders in the program receive a value of $0.02/points or more when redeeming for a flight, as of September 1, 2026, based on flight redemptions cardholders actually made over a period it names. That is a description of past redemptions, so this page uses it in none of its arithmetic.

One bank program publishes different rates for the same points depending on the use:

A purchase paid off with points has to be on one of the last 3 statements, and points go toward a statement credit from $25.

Another program redeems points in increments of 100 for $1 toward travel booked through its own travel service, or 1.00 cents a point.

Cents per point for each program are the subject of credit card rewards.

The break-even: when do points beat cash back?

The test divides the cash back rate by the points a card earns per dollar; the result, in cents, is the value a point needs to beat.

Which pays more at your spending?

With a fee in the picture, the answer changes with spending. The Financial Consumer Agency of Canada (FCAC) puts the method in one line: You may estimate the potential value of the rewards you may earn in a year and then subtract the annual fee.

FCAC also notes: Cards with an annual fee usually offer extra rewards and benefits or a lower interest rate. Some no-fee credit cards offer similar rewards and benefits to cards that do have an annual fee.

When do points come out ahead, and when does cash back?

In the arithmetic above, points come out ahead when the redemption actually used is worth more per point than the break-even, as some travel redemptions are; cash back comes out ahead when the redemptions used are worth less, or when spending is too low for a fee card’s extra earn to cover its fee.

FCAC’s questions about a rewards card go beyond the arithmetic: how likely you are to use each benefit, how long the rewards take to earn, whether you already get a benefit some other way, and whether there are restrictions. It also asks you to weigh the cost of carrying a balance, the interest paid on it, and how often you expect to use the card’s benefits.

Points you can take as a credit

Some programs let points pay a statement credit at a fixed rate, which sets what a point is worth for that use. The bank program’s pay-off rates in the table above work that way. One retail program publishes 10,000 points for $10 in rewards, and the same number of points, 10,000, for a $7 credit on the balance of its own credit card. That is 0.10 cents a point in rewards and 0.07 cents as a credit, so a point is worth less as a credit.

How cash back is calculated

Enter monthly spending by category, the card’s cash back rates and its annual fee; the calculator returns the year’s cash back before and after the fee, and what share of a year’s spending that is.

Each monthly amount is turned into a yearly amount and multiplied by its rate. Groceries, gas and transit, and dining each take their own rate, while recurring bills and other purchases share one base rate. Net cash back is the year’s total minus the fee, and the last figure is net cash back as a share of a year’s spending. The calculator has no box for a cap, so for a card whose category rate drops back partway through the year, its result runs ahead of what the card pays. The amounts it opens with are placeholders, not typical spending or rates.

Rewards and interest

FCAC notes: A credit card’s interest rate may be an important factor if you regularly carry a balance.

Card issuers give an interest-free grace period to pay for the previous month's purchases, beginning on the last day of the billing period, and federally regulated financial institutions must provide at least 21 days. It doesn't apply to cash advances, cash-like transactions and balance transfers, and interest applies if the balance isn't paid in full by the due date. How interest is charged when a balance is carried is on how credit card interest works.

Related pages

• Best cash back credit cards: cash back cards ranked, including no-fee cards.
• Best rewards cards: points cards ranked.
• Travel cards: points, airline and no-fee travel cards.
• Credit card rewards: the rewards programs and their points.
• How to choose a credit card: the steps for choosing a card.