I think it is no secret that majority of people use their credit card rewards for travel and that is generally a good usage of these loyalty rewards. But a lot of people ignore or even fail to realize that, depending on their reward system, they can use their cashback to get ahead financially, be it to save money, pay down debt or buy registered products.
Let us use my RBC Avion Visa Infinite Card as an example: you get 1 point for each dollar spent, not including the occasional promotions where you get extra bonus points. You can then use these points to buy travel products at the rate of 1 for 1: or 100 points for $1 in travel money. You can also use your points to buy other products, including financial rewards, electronics etc, but at a lower rate of 120 points for $1.
With the math above, it makes sense to use your Avion rewards to buy vacation packages and other related products (flying, care rental, hotels etc) . But if you want to get ahead financially and don’t care for travelling that much, then you can use your points to buy RRSP, TFSA, and other financial products. For example, at the moment, I have enough points to buy $500 in TFSA or RRSP savings which goes along way these days.
In addition to my Avion Visa card, I have a Master Card from Tangerine Bank, which allows me to earn 2% in cashback in two categories of my choice, from a list of nine categories ( mine are Bills and Gas) and 0.5% for all other purchases. Despite not using it as much as I use my Visa, I still manage to accumulate close to $10-15 a month in cashback, or around $130-150 a year, paid to me on a monthly basis. I save this money and use it at the end of the year to make a big purchase, pay it towards credit card balance, or use it to purchase Christmas presents for family and friends.
As you can see, these credit card reward systems make using them more fun and rewarding. But at the end of the day, it is not useful if you are accumulating points and getting cashback at the expense of having a big balance which cost you a lot more interest every month. Take the time to assess and compare which credit card would work best for you, based on their reward system, assuming all else being equal. But more importantly, earning rewards should be the second priority to the primary one of ensuring your credit card balance is always paid in full. When you do that, these rewards become even sweeter and you actually beat the bank at their game!