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Are Rewards Card with Annual Fees Better?

There are two types of credit card holders: those that want to maximize their rewards at any cost, and those that just want to avoid fees and interest at all costs.

For the first group, they’ll probably already have one (or even two) premium credit cards: that is, credit cards that have an annual fee. Credit cards with annual fees have more favourable rewards programs and often come with a slew of insurance products and other perks.

For the second group, they’ll likely gravitate to the free credit card offerings from the major banks. They’ll still be on the lookout for the best credit cards with no annual fee in Canada, but they’re probably not too concerned about squeezing every penny out of their credit card.

I’ve been part of the second group for most of my life. I always wondered why people would pay an annual fee to spend their own money. But when I was planning a trip across Canada and saw the flight prices, I rethought that. Perhaps there are cases when it’s worth paying an annual fee if the rewards you get outweigh the fees you pay.

Well, there’s no way to know by guessing. Credit card rewards are notoriously difficult to assign a dollar value to (cashback cards excepted). The value you get per point varies wildly, even within the same rewards program. RBC Avion points, for example, are worth 1.4 cents each on average, but can be redeemed for rewards that offer as much as 2 cents per point, or as little as 0.65 cents per point!


Comparing Cards

With my current credit card, the Tangerine Money-Back Credit Card, I earn 2% cashback in three categories of my choice – groceries, gas, and recurring bills – and 0.5% on everything else. The Tangerine credit card normally comes with only 2 bonus categories, but you can get a third by opening a Tangerine Savings Account and redeeming your monthly credit card rewards into it.

A flight across the country, from Toronto to Vancouver, costs an average of $625. Let’s take a look at some popular premium rewards programs and see if they are worth their price.


Real Cashback for Flights from Toronto to Vancouver


BMO World Elite

Avion Infinite

Aventura Infinite

Tangerine Money-Back Credit Card

Points Required





Spending Required





Annual Fee





Months Needed





Fees Paid





Value of flight after fee





Average Cashback Value






Let’s break down what’s happening in this chart.

First, the “Points Required” row is how many points you need to accumulate for each program before you have enough to fly to Vancouver from Toronto. This does not include taxes and fees, which you still have to pay even if you get the flight for free with your travel points. This lowers the real return. Some programs allow you to pay the taxes and fees with more points on top of the base price of the ticket.

Since my Tangerine card is a cashback card, I just put in the price of a flight to Vancouver.

The next row, “Spending Required,” is how much money you have to spend before you get enough points to redeem for a flight. The monthly spending I used to calculate this is according to the following chart:







Drug store






Other spending





Each of these cards have different bonus categories, so depending on your spending these numbers may not accurately reflect how many points you’ll earn. If you don’t own a car, getting gas as a bonus category isn’t going to do you much good. If you want to see how much you can earn with certain credit cards based on your spending, check out our credit card page.

The “Annual Fee” is self-explanatory. That’s the card’s annual fee.

Months Needed” is how many months it would take you to earn enough points to fly to Vancouver assuming you spent according to the spending chart. The fewer months needed, the better, because it means you can redeem your rewards more often. You’ll also spend less in fees.

Fees Paid” is how much you would have spent on the annual fee. For this calculation I averaged out the annual fee over 12 months to get a monthly fee, and multiplied it by the number of months needed to redeem for a flight.

Value of Flight After Fee” is the cost of fees subtracted from the price of the flight. The logic for including this is that you wouldn’t be paying for the card at all if you never planned to redeem for a flight. If you never want to use your points, paying an annual fee makes no sense. As such, the annual fee you pay is sort of a pre-payment on the ticket price.

Finally, the “Average Cashback Value” is the return on spending you get according to that spending chart. This value increases the more you spend. Credit cards are always more effective when you spend more per month, as you spend less on your annual fee before you get enough points to redeem.


The Results

Based on this unique spending profile, the best credit card for them would be the Aventura Infinite, as it requires the least spending to redeem for a flight to Vancouver and also takes the least time. It handily beats the Tangerine Money-Back credit card when it comes to real cashback value.

But at lower levels of spending, that’s not the case. At half the monthly spending indicated above, the Aventura card gives almost the same cashback as the no-fee Tangerine card. Always be sure to analyze your spending before getting a credit card with an annual fee so you can be sure you’re getting enough value for what you’re paying.

What’s telling is that the Tangerine card actually beats out the premium RBC Avion card at this level of spending. However, it’s important to note that you would earn rewards nearly a year faster with the Avion program rather than waiting for cashback, so it could still be worth it to take a small hit to your rewards earning to get on a plane more quickly.

Because credit card bonus categories vary from card to card, your spending habits could influence which card is best for you. Use our free tool to see how much your rewards are really worth!

Chris Chris 03/19/2019
Canadian personal finance buff and all-around writing enthusiast, Chris loves breaking down complicated money ideas to show that they're really not so complex. 
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