Who doesn’t want free gifts without spending more? With a rewards credit card, you can get more out of your purchases.
Most people associate credit cards with spending, but what if we tell you that you can get a lot more out of your purchases without overspending? Yes, it's possible with a rewards credit card.
Just like an air miles credit card, you earn rewards points when you spend with your rewards credit card. With these points, you can convert them into vouchers or discounts.
In this guide, we show you how to take advantage of rewards credit cards.
How do Rewards Credit Cards Work
Rewards credit cards allow you to collect and accumulate rewards points that can be traded for a range of benefits, such as participating merchants’ vouchers and discounts.
Rewards points are credited to your account when you spend on your card. The methods of acquiring points varies between banks. Typical examples are 1 point for every $5 spent, or 2 points per dollar spent in a selected store.
To see the available rewards, you can check the bank’s reward tier. In most cases, you will be able to log on to a given website to spend your points. Instructions on points redemption will be included with the credit card terms and conditions.
Related Article: Is It Really Possible to Save Money with a Credit Card?
5 Rules to Get the Most Bang for Your Buck
1. Measure rewards points in cashback (%) terms
Rewards schemes are designed to fool you into thinking that you’re actually saving a lot more than what you really are. Since banks have different rates for earning rewards points, the best way to compare between rewards credit cards are to look at:
- Conversion Rate: How many points does spending one dollar get you?
- Redemption Rate: How much actual cash value can you convert each point into?
With the two rates above, you can then calculate the actual cashback, which is the amount of actual cash value that you receive when you spend one dollar with the card.
Remember, the higher the cashback, the more the favourable the card.
The following are some examples of cashback calculations:
|Bank||Conversion Rate||Redemption Rate||Cashback per dollar spent|
|ANZ||S$1 spend = 0.20 points||520 points = S$10 cash||0.20 points x 10/520 = 0.38 cents (0.38%)|
|HSBC||S$1 spend = 1.00 point||3300 points = S$10 cash||1.00 points x 10/3300 = 0.30 cents (0.30%)|
|American Express||S$1 spend = 1.25 points||2100 points = S$10 cash||1.25 points x 10/2100 = 0.60 cents (0.60%)|
|Citibank||S$1 spend = 1.00 point||3600 points = S$10 cash||1.00 points x 10/3600 = 0.28 cents (0.28%)|
2. Find out the best rewards for the various categories (%) terms
Cards can have different rewards accumulation rates for different categories. Common categories include groceries, dining, petrol and shopping.
|Points received per S$1 spend on:||Redemption|
|ANZ Platinum Credit Card||1.2||0.2||0.2||520 points = S$10 cash|
|HSBC Visa Platinum Credit Card||1||5||1||3300 points = S$10 cash|
|UOB Preferred Platinum Card Account||0.4||2||0.4||1500 points = S$20 cash|
Taking the ANZ Platinum Credit Card as an example, the card gives you 6 rewards points per S$5 spent on groceries, petrol and entertainment, while only awarding 1 rewards point per S$5 spent on other categories.
3. Look out for preferred merchants
Most banks work with retailers to promote their credit cards. As such, you will receive more points when you spend at these selected stores.
|Preferred||Points received per S$1 spend on:||Redemption|
|Cards||Merchants||Preferred Merchants||Non-Preferred Merchants||Rate|
|American Express Platinum Credit Card||Platinum EXTRA Partners(eg: Reebonz, Harvey Norman, Montblanc, OPI)||6.25||1.25||2100 points = S$10 cash|
|OCBC Plus! Credit Card||NTUC||7.5||0.5||1350 Link Points = S$10 cash|
|DBS Takashimaya American Express Card||Takashimaya||0.2 Takashimaya point||0.2 DBS point||1200 DBS points = S$10 cash100 Takashimaya Points = $30 cash|
American Express Platinum Credit Card give you 10 rewards points for every dollar spent at Platinum EXTRA Partners, and only 1.25 points on non-preferred merchants. When choosing a credit card, always check the list of preferred merchants. Try to get the card that closely matches your lifestyle choices.
Another way you can accumulate more rewards points is when you use a particular product or service. Say, as a motorist, you can use a card that gives you extra points for buying petrol or car accessories.
4. Keep an eye on the latest promotions and welcome gifts
Credit cards offer promotions in the form of enhanced rewards points during certain periods, such as the Great Singapore Sale. During these seasons, most credit cards – even those that did not advertise their promotional periods – tend to step up their rewards.
Banks frequently offer welcome gifts when you sign up for a card with them as a new customer. These gifts however usually come with conditions attached to them which would have to be fulfilled first. For example, there could be minimum spending requirements, or even the need to pay the annual fee in full upfront upon application.
5. Check the expiry dates for your points
Don’t forget to check if there are expiry dates on these welcome gift offers. An approval deadline could be set to claim gifts, or gifts could be limited in quantities and be rewarded on a first come first served basis.
The same goes for points redemption. Although most reward points have an expiry of more than 1 year, it’s recommended to set a reminder on your calendar. You don’t want an occasion where your hard-earned points are lost because you forgot to redeem them before their expiry dates.