Credit Cards and Rewards

You can find a lot of Credit Cards with different Rewards Programs. Basically we have two rewards category: cash-based cards and point-based cards.

Cash-Based Rewards

You can find a lot of Credit Cards in this category. When a card for example is 2% cash-back, it means for every $100.00 that you spent, the card issuer gives you $2.00. In other words:

\[ \begin{align*} \frac {\text{gain}} {\text{spend}} &= \frac {\$2.00} {\$100.00} \\ \Rightarrow \text{gain} &= \frac {\$2.00} {\$100.00} \times \text{spend} \\ &= \$0.02 \times \text{spend} \end{align*}\]

As you can see there is no complication here. A more mathematically accurate calculation is as follow:

\[ \begin{align*} \$100 \text{ spend} &= \$2 \text{ gain} \\ \Rightarrow \$1 \text{ spend} &= \$0.02 \text{ gain} \\ \Rightarrow \$1 \text{ spend} &= \$2\% \text{ gain} \end{align*}\]

So spending $1 earn us 2 cents. As another example spending $200 earns us $4:

\[ \begin{align*} \$1 \text{ spend} &= \$0.02 \text{ gain} \\ \Rightarrow \$1 \times 200 \text{ spend} &= \$0.02 \times 200 \text{ gain} \\ \Rightarrow \$200 \text{ spend} &= \$4 \text{ gain} \end{align*}\]

Point-Based Rewards

For me points are a type of currency that you can only spend in some specific places. Because of that some people, including me, prefer to have cash-back cards. After all you can spend dollars everywhere. Sometimes understanding the value of points is tricky and needs calculation. For example see President’s Choice Financial Credit Cards:

Fortunately PC mentioned on the website that 10,000 points = $10. So it's easy to find the worth of 1 point:

\[ \begin{align*} 10000 \text{ points} &= \$10 \text{ gain} \\ \Rightarrow 1 \text{ points} &= \$0.001 \text{ gain} \end{align*}\]

Let's assume for a specific category (e.g. SHOPPERS DRUG MART) the card gives us p points per $1 that we spent:

\[ \begin{align*} \$1 \text{ spend} &= p \text{ points} \\ \Rightarrow \$1 \text{ spend} &= \$0.001 \times p \text{ gain} \\ \Rightarrow \$1 \text{ spend} &= \$\frac{p}{1000} \text{ gain} \\ \Rightarrow \$1 \text{ spend} &= \$\frac{p}{10}\% \text{ gain} \end{align*}\]

So we need to divide the points by 10 to convert it cash-back percentage. If you couldn't get the premuim ones and ended with PC Financial Mastercard, then it means 2.5% cash-back in pharmacy, 2% in travel and 1% in grocery and everything besides gas. Of course you are limited to Loblaw's divisions.

As you can see the gas points is per litre and not per dollar. This is where the fun begins! Each Esso station has different price per litre. So we cannot convert gas points to cash-back without considering the price in a specific station. According to GasBuddy, the price of gas in Esso station in downtown is 101.9 cents but Costco sells it at 93.5 cents. Let's assume we have another cash-back card with 2% cash-back for gas. The net gas price per litre for Costco is \(93.5 \times (1 - 2\%) = 91.63\) cents and for Esso is \(101.9 - 30 \text{ points} = 101.9 - 3 = 98.9\). So Costco is cheaper. As you can see point-based credit cards require a lot of calculation!

Anyway this is a good Credit Card; considering that for pharmacy you get 2.5% and at least 1% cash-back for the rest without paying annual fees. You can combine it with Tangerine Credit Card to have the best of both worlds.