Add one more credit card to the tally for rewards cards in Canada. Capital One has recently introduced the Smart Rewards Mastercard. This card takes a new step for cards in Canada in how it rewards points. Cardholders will not earn points on each purchase but rather each time they pay down or pay off their balance. This reward methodology mimics the Citi Double Cash card in the U.S. (Thanks @joshnet for reminding me as I couldn’t remember which one it was exactly!)
Earning Points
The Capital One Smart Rewards Mastercard is a no annual fee card that rewards 5 points per $1 paid towards your card balance. Thus if you pay $100 towards your card balance you would earn 500 points. The key word in this proposition is ‘balance’ and by that they are referring to any balance you have over $0. You won’t earn rewards for any payments made to an account that has a $0 balance.
Technically speaking this means you are still being rewarded on the actual spending on your card. Where the difference lies versus rewards cards in the traditional sense is when you are rewarded those points. If you go out and spend $500 on your Capital One card but only pay $200 towards your balance you will only earn 1,000 points. Whereas other programs would reward you right away on all of that $500 spend. Of course you’ll earn those points eventually with Capital One as soon as you pay off more of your balance.
Now, you might be thinking, wow 5 points per dollar! Here we have another 5x points card in the likes of the American Express Cobalt Card, MBNA World Elite Mastercard and Scotiabank Gold American Express Card (The true points earning machines!) Well I hate to burst your bubble as unfortunately we have another case of “When earning 5x points isn’t the same as earning 5x points – a loyalty lesson” (I highly recommend reading that article – even two years on it is one of the most popular on Rewards Canada)
If you’ve read the article before or will choose to read it later, go on to the next section to find out why Capital One’s 5x points doesn’t match these other cards.
Redeeming points
The landing page for the Capital One Smart Rewards Mastercard provides absolutely no detail on the value of those 5x points. They pretty much don’t say anything about the rewards to be honest with you! So I initiated an online chat with Capital One to see if I could get the details. And let me tell that you that was no easy task!
The chat lasted perhaps 20 to 30 minutes and you could tell they didn’t want to provide the details. At first they simply said rewards vary and you can find out when you log in to your Capital One account. I pressed on but still only received some generic answers without learning any redemption rates or the value. I had learned the points could be used for statement credits, a cash back cheque, gift cards and so on but no answer to the actual value. Eventually, after mentioned I would never apply for card without knowing the actual value for the points earned they seemed to relent and provided me with the details. Not a lot of detail but enough to learn the value.
For statement credits or a cash back cheque the redemption rate is rate 750 points to $1. This means you would be receiving 0.13 cents per point. As you get 5 points per dollar this will equal a cash back return of 0.67%. Which means you can consider it a 0.67% cash back card.
This is where 5x points doesn’t equal 5x points. For example the American Express Cobalt Card’s 5x points, in its simplest form is equal to a 5% cash back or travel redemption return. That’s nearly 7.5 times more value than this Cap One card.
For gift cards they didn’t provide any rates as they vary by retailer and denomination. And that is all I was able to find out.
Still, when compared to other no annual fee cards in the market this card isn’t the bottom of the pile. The vast swath of no annual fee reward cards in Canada provide anywhere from 0.5% to 2% returns. And there are several at that 0.5% level so this card is better than those ones.
Wrapping it up
The Capital One Smart Rewards Mastercard is another new entrant into Canada’s over saturated rewards credit card market. My guess is it will be one those of cards with ‘shady marketing’ as we like to call it here on Rewards Canada where the issuer heralds the earn rate (BMO, I’m looking at you) without providing the consumer with the whole picture. And what is that whole picture? It’s what we always talk about and that’s “Remember people, it’s all about the earn AND the burn!” You have to know both the earn rate and the redemption rates and Capital One makes no mention whatsoever of the redmeption (the burn) for this card. To me, it seems they are hoping to rope people in with the “Earn 5x points for $1 paid” without those consumers learning the true value of what they will be receiving.
Click here to learn more about the Capital One Smart Rewards Mastercard.
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