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Sometimes doing smart things with money can feel counter intuitive. I had an interesting thing happen this past week and I thought I would share it with you. A friend and I were out having lunch, nothing fancy just a good burrito. When it came time to pay, he pulled out his credit card and I pulled out mine.

He looked at my credit card and said,

“I haven’t seen that one before what is it?”

Surprised, since the card isn’t new, I said “It’s my Scotia Momentum Infinite Visa.” I had to read it since I can never remember the name.

“Cool, what do you get with it?” he asked

“It’s got a bunch of different benefits, but the big one is cash back.” I said.

“Oh. I have a cash back card too. It’s nice to get the money at the end of the year.” I could see he wanted to ask. But I thought rather than spit out my half bite of burrito I would just wait.

Finally he sheepishly asked,”What’s the cash back rate on it?”

“It depends on what you buy, but 1% to 4%”

“Holy carp. Mine is 1% on everything. Why is yours so high?”

Then I said something he never thought I would say.

“Well… I pay for mine.”

Completely dumbfounded by this he looked at me and said.

“You pay for your credit card? PAY?…. YOU? The guy who picks up pennies, even though they aren’t in circulation any more!” (FYI Canada got rid of the penny a few years back)

I laughed, “Yep and I do it happily because I get a lot more money back than I pay them.”

“It can’t be worth it,” he said.

Feeling the urge to dive into my burrito and skip the money lesson, I decided that to defend my actions.

Should You Pay for a Cash Back Credit Card

“Here’s how my card works. I get:

  • 4% back on gas and grocery store purchases,
  • 2% back on recurring transactions (cable, internet etc…) and prescriptions
  • 1% on everything else

and I pay $99 for it happily, every year.”

“How is that worth it?” He asked.

Trying to avoid a math lesson I did my best to break it down quickly so my burrito didn’t get too cold.

Paying for a Cash Back Credit Card – Crunching the Numbers

“Well I did the math. Here’s how it shakes down:

We spend in gas every month $300, so that’s $12 cash back every month with my card, and $3 with yours.

At the end of the year I get $120 back just for gas, you get $30. So that’s $90 extra in my pocket every year.

Then you have groceries. That was the big one. I pay anywhere around $1000 a month for my groceries (and household items, and clothes in some of the larger grocery chains).

So that’s $40 cash back every month I get compared to your $10 for the same amount.

At the end of the year that’s $360 extra than what you get with your 1%. Just the groceries alone make it worthwhile for the card. The rest is just gravy.” At that point my burrito was turning luke warm, so I dove into it like a child into their Hallowe’en candy.

“I never thought about it like that. I just thought paying for a card was senseless.”

Should you pay for a cash back credit card

Sometimes You Have to Spend Money to Make More Money

I paused for a second while I inhaled the rest of my meal and said, “Well it can be, but in this case, spending a little money, makes me quite a bit more money. That’s just a small way you can be better with your money. It feels really weird at first, but once you get your amount back at the end of the year it’s super useful.”

“There’s the other benefits of the card, but if you are wondering why someone pays for a cash back card, that’s why. The numbers work. Just from gas and groceries I’m getting nearly $500 cash back. Let alone my other recurring bills and regular spending.”

Lastly I added:

“One other thing I like about this cash back card is that the average benefit from a credit card is usually 1.5% to 2% this one is 4% and I get it back every year. Plus it’s Visa so it’s accepted pretty much everywhere. Also it’s not points that I have to figure out how I’m claiming it. It’s cash, to me that is way more valuable than anything else.”

My friend went and applied for this card right away. Sometimes spending money to save money is a good idea. In this case it was obvious that I should do it.

If you are thinking about paying for a cash back credit card, the card I use is currently waiving the first year of it’s $99 fee. So you can try it out absolutely risk free.

Click here to see if it’s right for you.

Family Money Plan Takeaway

If you are a responsible credit card handler (no balances, paid off every month, don’t overspend) then a cash back credit card can be a great way to get extra money every year for spending that you are already doing.

If you are spending more than $210 a month at the grocery store this credit card will pay for itself and more.


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