When it comes to credit cards, most of us are like Jon Snow in Game of Thrones. No, it’s not that we all want to take the Black, but that, in truth, we know nothing. And I’m including myself in that generalisation. For the longest time, I thought people should choose between cashback credit cards, rewards credit cards and air miles credit cards, depending on what they wanted to earn.
My previous understanding of how credit cards worked seemed to be pretty straightforward…
- Cashback credit cards earn cash rebates, which can be used to offset your credit card bill.
- Rewards credit cards earn you rewards points, which are usually worth more than cash rebates, but can only be redeemed for dining and shopping vouchers.
- Air miles credit cards earn you air miles, which can be used to offset the cost of flights and can even be redeemed to get free flights to popular destinations around the world.
In my imaginary world, the various credit cards in Singapore all fell neatly into one of these three categories, and there was no identity crisis about what the purpose of each card was.
That understanding of credit cards is wrong… and here’s why
Cashback credit cards may be the most popular among Singaporeans, but that’s only because the way they work is easily explained – you spend a certain amount each month, you get a percentage of that back in cash rebates.
No brainer. Easy to understand. Well, sort of.
However, did you know that, technically, most air miles cards are rewards cards? That’s right, even though an air miles card claims to earn miles with every dollar you spend, you’re actually earning rewards points that you will need to convert to miles.
What this means, is that if there are rewards credit cards that can earn you a significant amount of points, that essentially means you can earn more miles by using a rewards credit card, compared to an air miles credit card.
First, let’s take a look at some popular air miles credit cards
The ANZ Travel Visa Signature card earns you 1.4 miles per dollar spent locally, which is one of the best rates out there.
What is not immediately obvious is that you technically don’t earn air miles directly. Instead, you earn Travel$, which are equivalent to air miles – 1 Travel$ is 1 mile. That means you earn 1.4 Travel$ per dollar spent locally on the ANZ Travel Visa Signature card. You are capped at earning 100,000 Travel$ per monthly statement. To earn that maximum, you would have to spend slightly over $70,000 locally each month, so most cardholders would probably not be affected. Travel$ have a validity of 5 years.
The UOB PRVI Miles card also earns 1.4 miles per dollar spent locally.
Similar to the ANZ Travel Visa Signature card, the UOB PRVI Miles card doesn’t earn air miles directly, but UNI$. The conversion rate is UNI$1 to 2 miles. So you’re actually earning UNI$3.5 for every $5 spent locally. Yes, it comes up to 1.4 miles per dollar spent, but that means you don’t earn any UNI$ for transactions below $5. That being said, there doesn’t seem to be any earning cap for UNI$. UNI$ expire after 2 years.
Okay, what about the mechanics of redemption?
For the ANZ Travel Visa Signature card, you have to redeem a minimum of 2,000 miles at a time, unless it’s KrisFlyer miles, in which you have to redeem a minimum of 5,000 miles at a time. There is a $25 fee for each conversion.
For the UOB PRVI Miles card, to redeem your miles, you have to redeem a minimum 10,000 miles at a time, or accumulate at least UNI$5,000. Yes, that means you have to spend over $7,000 before you can even smell any miles. Fortunately, UNI$ are valid for 2 years. Do note that there is also a $25 fee for each conversion.
Now let’s look at some rewards credit cards that can earn you 10X rewards points on your spending
The Citibank Rewards card earns you 1 Reward point for each dollar spent locally. However, if you spend on clothes, shoes and bags, whether online or offline, or just in any departmental store, you can earn 10X the Rewards points. And you get 20X Rewards points if you shop on Qoo10 and Amazon, though these are promotions that ends on 30 April and 30 June 2017 respectively.
The maximum Rewards points you can earn for these categories is 120,000 each year. With 10X Rewards points, that’s only an average spend of $1,000 a month.
You can redeem the yearly maximum of 120,000 Rewards points for 48,000 miles. That’s a rate of 4 miles per $1 spent.
Interested in the Citibank Rewards card? You can easily apply here.
The UOB Preferred Platinum card earns you UNI$, just like the UOB PRVI Miles card. However, it only earns UNI$1 for every $5 spent. That said, the UOB Preferred Platinum card earns 10X the UNI$ for all transactions done online and all transactions using VISA payWave – the contactless payment feature. That’s technically UNI$2 per $1 spent online or using payWave, although you don’t earn any UNI$ for transactions below $5. The maximum you can earn a year is UNI$24,000, or an average spend of $1,000 a month of online transactions and payWave transactions.
You can redeem the yearly maximum of UNI$24,000 for 48,000 miles. That’s a rate of 4 miles per $1 spent. However, do take note that UOB only allows you to redeem miles in blocks of 10,000.
Interested in the UOB Preferred Platinum card? Apply here to get your card.
Is this blowing your mind yet? No?
In case it’s not clear enough – the Citibank Rewards card and the UOB Preferred Platinum card both can earn you 4 miles per $1. The best “air miles” cards, the ANZ Travel Signature Card and the UOB PRVI Miles card, can offer is only 1.4 miles per $1 spent locally.
But don’t just look at these cards. Check out the HSBC Revolution card, which gives 5 Rewards points per $1 spent online, on dining and local entertainment like bars, clubs and KTV joints. That’s equivalent to 2 miles per $1, which is still better than an air miles card.
So if most of your spending is online, or on clothes, shoes and bags, you’re definitely missing out if you’re charging it to your air miles card.
And if you sign up for the HSBC Revolution card with MoneySmart, you can redeem an exclusive Delsey Helium Aero 71cm TSA Luggage worth S$529 as well as be eligible for up to $40 cashback. You can apply here to get the HSBC Revolution card.
Why would anyone apply for an air miles credit card then?
Simply because air miles cards reward higher spending. There is generally no cap on the amount you can earn, unlike the rewards cards.
The ANZ Travel Visa Signature card gives you 2,000 bonus air miles if you spend $500 on the card in the first month. You can also earn 10,000 miles by paying your $200 annual fee.
The UOB PRVI Miles card gives you up to 8,000 air miles if you spend $1,500 in the first month and 20,000 bonus air miles if you spend $50,000 in a year.
Air miles cards also give extra benefits like travel lounge access, hotel privileges and complimentary travel insurance.
So if your credit card expenditure exceeds $1,000 a month, or if you generally don’t spend on the categories that give 10X rewards points, then you’re better off sticking with your air miles card.
Do you have an air miles credit card? Are you planning to switch after reading this article? We want to hear from you.