What is Cashback And How Does it Work?

Eliana Tan

Eliana Tan

Last updated 28 May, 2024

With cashback, every purchase becomes a little more rewarding, turning your routine shopping into a smart way to save. Here's how cashback works!

In the hustle and bustle of everyday life, getting a little extra back on your spending can make a big difference. Cashback programmes offer a fantastic way to turn your routine purchases into tangible rewards, helping you save more and make your money work harder for you. 

Whether you’re a frequent shopper or simply looking to optimise your expenses, understanding how cashback works is key to maximising your savings. This comprehensive guide will take you through the ins and outs of cashback, from how it functions to the various types of cashback credit cards available in Singapore.

Ready to turn your everyday spending into smart savings? Let’s dive in!

Table of contents


What is cashback?

Cashback is a fantastic rewards programme that turns your everyday spending into savings by giving you back a percentage of the money you spend. Once exclusive to credit cards, cashback rewards have now expanded to include some debit cards, retailers, and even some online stores!

Here's how it works: When you make a purchase with a cashback card, a percentage of that purchase is refunded to you as cashback/rebate. This cashback accumulates over your billing cycle and can be redeemed at the end of the cycle in various ways – such as statement credits (that decreases your card’s balance), or even converted into points for other rewards.

However, it’s important to note that cashback isn't instant. Your rewards will only appear after your purchase is processed, and sometimes not until you've paid off the monthly credit card bill. Immediate cash withdrawal from a credit card is called a cash advance, which usually comes with high fees and steep interest rates.

Pros ✅
Cons ❌
Earn back a portion of what you spend, effectively reducing your overall expenses
Rewards might be limited to items you don’t usually purchase, encouraging extra spending
Cashback may be converted and redeemed as rewards points for certain cards
Variety of cashback cards available – standard cashback cards (e.g. UOB One Card) and unlimited cashback cards (e.g. UOB Absolute Cashback Card)


How does cashback work?

Cashback programs can vary greatly depending on the type of card you have. Here’s a breakdown of the main types:

Tiered category cashback cards

These cards reward you with higher cashback percentages on specific types of purchases. For example, you might earn 2% to 3% bonus cashback (or sometimes even more) on categories like petrol or dining. However, these juicy rewards often come with cashback caps. For some cashback cards, the cashback cap is shared across all eligible spend categories whereas for others, the cap varies from category to category. 

In any case, once you’ve hit the cashback cap, the bonus cashback rate will drop to the base cashback rate for said eligible categories. In contrast, all other purchases generally earn the base cashback regardless of whether card minimum spend or cashback cap is met.

Examples of such cashback cards include:

Credit card
Cashback/rebate earn rate
Base cashback/rebate earn rate
Minimum spend requirement
POSB Everyday Card
Up to 10%
S$800 per calendar month
OCBC 365 Card
Up to 6%
S$800 per calendar month
Citi Cash Back Card
Up to 8%
S$800 per calendar month
UOB One Card
Up to 10%
Up to 3.33%
S$500 / S$1,000 / S$2,000 spend per month per quarter

Rotating category cashback cards

Rotating category cashback cards are a bit more complex but can be very rewarding. These cards offer higher cashback rates on specific categories of purchases that can be changed every quarter. To earn the higher rate, you need to activate the new categories each quarter, adding a bit of excitement and strategy to your spending!

One example of this is the Maybank Family & Friends Card. With a minimum monthly spend of S$800, you’ll get to enjoy 8% cashback (up to S$125 in total per calendar month, capped at S$25 per category) on five preferred categories out of 10 choices – groceries, dining & food delivery, transport, data communication & online TV streaming, retail & pets, online fashion, entertainment, pharmacy, sports & sports apparel, and beauty & wellness. As for the cashback on Malaysian Ringgit, you also get to enjoy 8% cashback (capped at S$25). 

Choose-your-own-category cashback cards

Some cards put you in the driver’s seat, letting you choose your own bonus cashback category. You can typically earn a higher rate in a few select categories and 0.25%-1% cashback on general purchases. Instead of being tied to fixed categories or keeping track of rotating ones, you can pick from a list of options that best match your spending habits.

By understanding how each type of cashback card works, you can choose the one that best fits your lifestyle and maximise your rewards, turning your everyday spending into smart savings!

Best cashback credit cards in Singapore

Credit card
Local cashback
Overseas cashback
Monthly spend required
Citi Cash Back Card
Citi Cashback+
Up to 8%
OCBC 365 Card
Up to 6%
POSB Everyday Card
Up to 10%
CIMB Visa Signature Card

How to best use cashback credit cards?

Consider the categories you typically spend on

Review your spending habits to understand where your money goes each month. If you spend a lot on groceries, a cashback card that offers higher rewards for grocery purchases could be your best bet.

Look for a card with a welcome bonus

Many credit cards offer welcome bonuses, giving you a chance to earn extra cashback by meeting a spending threshold in the first few months. These bonuses can significantly boost your cashback earnings early on.

💡 Pro-tip: Another way to elevate your welcome bonus to the next level is to sign up for a credit card with us on SingSaver! We’re constantly running exclusive and limited-time offers featuring exciting rewards such as Dyson Supersonic, Apple MacBook Pro, and more!

Try a choice category cashback card

Some credit cards let you choose the category that will earn a higher cashback rate. This flexibility can help you earn more without changing your spending habits.

Watch out for fees

Annual fees can eat into your cashback rewards. For example, most credit cards in Singapore have an annual fee of S$196.20, along with a complimentary first-year annual fee waiver. However, beyond that, if your cashback earned is less than that of the annual fee, you may not be maximising your card’s benefit. That said, everyone’s goals for using a cashback card differ. For some, earning some cashback to offset monthly expenses is reason enough. 

Alternatively, consider cards with no annual fee to maximise your net cashback. An example of this would be the UOB EVOL Card where the annual fee is perpetually waived with minimum 3 qualifying transactions per month per card membership year. Also, be cautious of foreign transaction fees if you plan to use your card abroad, as these can also reduce your rewards.

Avoid owing overdue credit card bills 

To truly benefit from a cashback card, avoid carrying forward an overdue balance into the next billing cycle/month. Interest charges can snowball quickly and outweigh the rebates earned in the first place because they are often compounded daily on top of your owed balance until it is paid off in full. Spend only what you can comfortably pay off each month to maximise your cashback benefits without incurring extra costs.

By strategically choosing and using your cashback credit card, you can turn everyday purchases into valuable savings while avoiding common pitfalls.

Frequently asked questions

What’s the difference between cashback and cash rebates?

While both cashback and cash rebates put money back in your pocket, they work a bit differently. Cashback is typically earned as a percentage of your spending and is automatically credited to your account. Cash rebates, on the other hand, often require you to pay full price upfront and then submit a redemption request to receive a portion of your money back later. But the similarity between the two is that they’re both typically used to offset your credit card’s bill.

What’s the difference between cashback and miles?

Cashback and miles both offer rewards, but they cater to different needs. Cashback gives you a percentage of your spending back in cash, which you can use however you like. Miles, often earned with travel credit cards, accumulate based on your spending and can be redeemed for flights, hotel stays, and other travel-related expenses. If you prefer flexible rewards you can use anywhere, cashback is ideal. If you love travelling, earning miles might be more beneficial.

What’s the difference between cashback and rewards points?

Cashback converts your spending into cash returns, while rewards points can be redeemed for various perks such as merchandise, travel, or gift cards. Rewards points programmes often offer a range of redemption options, allowing you to choose what best suits your needs. Cashback is straightforward and easy to understand, making it a great option for those who prefer simplicity. Rewards points, on the other hand, can offer more variety and potentially higher value if you take advantage of their specific redemption options.

Looking for the best credit cards to complement your spending patterns and expenditure in 2024? Check out our Ultimate Credit Card Guide that covers all things credit cards in Singapore – from choosing between a cashback, miles, or rewards credit card to planning your credit card strategy.


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