Are Credit Card Rewards Programs Worth It?

Credit card rewards programs promise a range of benefits, from cashback and air miles to exclusive deals and discounts. But are these rewards programs truly worth it? Let's delve into the various types of credit card rewards programs available in Singapore and analyse whether their benefits outweigh the costs.

Types of Credit Card Rewards Programs

1. Cashback Programs
   

   1. Overview: Cashback credit cards offer a percentage of your spending back to you. This can range from 1% to 10% or more, depending on the card and the type of purchase.
      

   2. Examples: The DBS yuu Card, OCBC 365 Credit Card, and UOB One Credit Card are popular choices offering cashback rebates on dining, groceries, petrol, and more.

2. Air Miles Programs
   

   1. Overview: These cards reward you with miles for every dollar spent. Accumulated miles can be redeemed for flights, hotel stays, and other travel-related expenses.
      

   2. Examples: Cards like the Amex SIA Business Credit Card, Citi PremierMiles Card and UOB PRVI Miles Card cater to frequent travelers.

3. Rewards Points Programs
   

   1. Overview: Points-based cards accumulate points for every dollar spent, which can be redeemed for a variety of rewards, including vouchers, merchandise, and travel deals. Some cards offer exclusive perks such as dining privileges, access to events, or concierge services too.

   2. Examples: The Citi Rewards Card and DBS Woman’s World Credit Card offer flexible rewards redemption options.

Analysing the Benefits vs. Costs

Benefits

1. Financial Savings: Cashback and discounts can lead to savings, especially if they align with your regular spending habits.

2. Travel Perks: For frequent travelers, air miles can translate into free or discounted flights, hotel stays, and other travel-related benefits.

3. Convenience and Others: Lifestyle rewards can provide conveniences such as airport lounge access, concierge services, and exclusive event invitations. Some cards allow you to earn bonus rewards on groceries, petrol, dining, etc.

4. Flexibility: Points and rewards programs often offer a wide range of redemption options, giving cardholders the flexibility to choose rewards that best suit their needs.

For example, though HSBC recently diminished the benefits of its once-popular HSBC Revolution card, it rolled out a Live Your Adventure Lucky Draw from 24 June to 23 September 2024, stand to win a brand‑new all‑electric Mercedes-Benz EQB or round-trip Economy class ticket to Paris. If you sign up and activate HSBC Live+ Credit Card, there’s up to 8% cashback and 15% discount at certain restaurants etc with welcome gifts when you spend at least $500.

Costs

1. Annual Fees: Many rewards cards come with annual fees that can range from S$150 to over S$500. Some premium cards can have even higher fees.

2. Interest Rates: Carrying a balance on your credit card can lead to high-interest charges, often exceeding the value of the rewards earned.

3. Spending Requirements: Some rewards programs have minimum spending requirements to unlock certain benefits, which can lead to unnecessary spending. Do ensure that you have a dedicated budget and tracking of expenses to reduce impulse buying.

4. Expiry and Restrictions: Rewards points or miles often come with expiry dates, and redemption may be subject to restrictions and blackout dates. Some credit cards limit the amount of rewards you can earn too so do read up the terms and conditions in fine print.

Are they worth it?

To determine if a credit card rewards program is worth it, consider the following:

1. Spending Habits: Align your card choice with your spending habits. If you frequently dine out, a cashback card with high dining rebates might be beneficial. For frequent travelers, an air miles card could offer substantial savings.

2. Annual Fee vs. Rewards Value: Calculate the value of the rewards you earn in a year and compare it to the card’s annual fee. If the rewards outweigh the fee, the card is likely worth it.

3. Flexibility and Convenience: Consider the flexibility and ease of redeeming rewards. Cards that offer easy and varied redemption options can enhance the value of the rewards.

4. Additional Perks: Don’t overlook additional perks like travel insurance, purchase protection, and concierge services. These can add significant value beyond the basic rewards.

Conclusion

Credit card rewards programs can indeed be worth it, provided you choose a card that aligns with your spending habits and lifestyle. You need to monitor your bills to pay in full monthly to avoid additional interest charges too.

Carefully evaluate the costs, such as annual fees and interest rates, against the potential benefits. By making an informed decision, you can maximise the value you get from your credit card and enjoy substantial rewards and savings.

For Singaporeans, the key is to select a card that offers rewards in categories where you naturally spend the most, ensuring that the benefits far exceed the costs. With the right choice, credit card rewards programs can be a valuable addition to your financial toolkit.

Cast Your Financial Spells Wisely,

Value Vaulter