Canadian Finance Blog

Posted: 31 Oct 2011 02:00 AM PDT

A few weeks ago I pointed out why you might as well get rewarded for money you are spending already. But what should you look for in a rewards credit card? Different people prefer different types of rewards, and there’s no shortage of options available. Some offer airline miles, others will let you chose items from a catalogue. I’ve never really bought into these types of rewards though. It’s a bit of a hassle to jump through hoops to book a trip and I don’t really want to build up points to choose an item from a limited selection.

Cash-Back Credit Card Rewards

I would much rather have a credit card that pays me back in cash. Both of my major credit cards give me cash rewards. I can spend the money on things I actually need like groceries and gas, not vacations and kitchen gadgets. Or possibly even better, with the TrueEarnings Card from Costco and American Express that I’ve been trying out for this post series, I can cash the cheque at Costco and really do anything with the money. I can redeem my rebate in January and get cash or goods and services.

How the American Express TrueEarnings Card Can Work For You

So how can the TrueEarnings Card work for you? That depends on what your goals are. Are you trying to pay off debt or save up an emergency fund? Then simply take the annual reward money and use it to get you one step closer to your target. If you do a large portion of your shopping at Costco, then you can easily spend the money in store. Since I’m at Costco every week for some of my grocery shopping, as well as occasional clothing and household purchases and even gas, I’ll likely just spend the money there when I get my first cash-back rebate. But that still helps my bottom line greatly…less of a drain on my monthly spending means I’ll have more money to stock away in my TFSA.

But as I mentioned before, the cash-back rewards are not the only benefit of the TrueEarnings Card. First off, having no annual fee is a must for me. If your credit card has an annual fee, take a good look at what it offers and decide if the cost is worth it. For example, if you’re carrying a balance then it might be worth the annual fee if it’s a low- interest rate card. However, if you’re carrying a balance every month, you’d probably still be better off transferring that balance to a line of credit until you get it all paid off.

Another great way to get the most out of your cash back reward is to take advantage of supplementary cards. My wife has a supplementary card under my account so when she uses it at Costco or anywhere else, we are accumulating a larger cash payout in the new year.

Do you have the TrueEarnings Card from Costco and American Express? What perks have you taken advantage of? How do you use your cash-back rebate?

Guide to Choosing a Rewards Credit Card originally appeared on Canadian Finance Blog on October 31, 2011.