How do Cash Back Credit Cards Work?

Cash back credit cards give you a small percentage of your purchases back as rewards.

You use the card for everyday spending, and the issuer returns a portion as:

• Statement credits

• Direct deposits or cheques

• Points you can redeem for cash-equivalent value

For example, if you earn 2% cash back and spend $500, you get $10 back in rewards.

The key catch: if you carry a balance and pay interest, those charges can easily wipe out the value of your cash back.

KOHO Everything

If you like the idea of cash back but don’t want to juggle traditional credit card debt, KOHO Everything gives you cash back:

• Grow your savings with 3.5% interest, one of the highest rates in Canada

• Earn a 2% cash back rate on groceries, eating, drinking, and transportation and 0.5% cash back on everything else

• There are no foreign exchange fees, so you save on international purchases and travel

• Subscribe to Credit Building, it's an affordable way to build your credit history

• Unlimited transactions and free e-transfers

• No minimum balance required, ever

How Cash Back Credit Cards Actually Calculate Rewards

Most cash back credit cards follow one of these structures:

• Flat-rate: Same cash back rate on all purchases (e.g., 1% on everything).

• Tiered: Different rates for categories (e.g., 2–4% on groceries or gas, 1% on everything else).

• Rotating categories: Bonus cash back on certain categories that change over time.

Rewards usually accumulate in your account and can be:

• Automatically applied as a statement credit

• Redeemed manually through your bank’s rewards portal

• Sometimes converted to gift cards or travel credits

Interest and Fees

Cash back sounds great, but:

• If you don’t pay in full, interest charges can outweigh the rewards.

• Some cards have annual fees that only make sense if you spend enough to justify them.