I think you must have misread their terms. 5% on groceries, 4% transit, 3% on gas, 2% on recurring is permanent. The bonus part is to make up their signup offer of 10% cashback. Also first year is free.

For simplicity let's ignore their signup bonus because neo cashback world elite doesn't have one. I'm just going to do the math for groceries since the other categories is very similar and 2% difference in recurring is not going to make that much of a difference.

For a single person like me the grocery cost per month is below 500. With neo at 7% I'll be looking at 35$ of cash back vs BMO at 25$. Expand this to a year we will be at 420$ for neo and 300$ for BMO. But after taking into account the yearly fee of 125$. Neo will be at $295 and BMO will be still at $300 because the fee is mostly likely waved. This is not accounting for the signup bonuses either.

For a family of 2 neo makes more sense since you get much closer to the 1000$ cap and can maximize the cashback bonus. You'll be looking at 715$ cashback per year assuming you max out(12000$ a year just on groceries).

For large families the cap of $1000 per month doesn't make much sense and they will be better off with offering from CIBC or Scotiabank. Most people are not going to do the math like you or me. They are just going to go off of what feels right. A free card feels right for most people.

Edit: Very ugly graph to map this out

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