When it comes to personal finance, one of Singaporeans’ favourite conversation topics is the eternal debate between miles and cashback.
Throughout my 20s, I relied mostly on “cashback” credit cards, which gives you back a percentage of the money you spend. As a single adult then spending less than S$800 each month, even if I had managed to redeem four miles for each dollar spent, after an entire year, I would have just enough for a one-way business class flight to Philippines – flight time of three hours.
Back then, it just made the most sense for me to choose credit cards that would put cash back in my pocket. However, that changed after I became a parent and started shouldering bigger household expenses.
HOW CREDIT CARD REWARDS GENERALLY WORK
Rewards aside, there are generally two kinds of credit cards: Cards for general spending and cards for specialised spending.
General spending cards are easier to manage, since you don’t have to think about using the right card for the right merchant or hitting a minimum spending requirement each month. However, the trade-off for this convenience is a much lower reward rate, such as a 1 per cent to 2 per cent cashback or one to two miles per dollar.
In contrast, specialised spending cards give far more generous rewards each time you spend. You could be earning as much as 10 per cent cashback or four to 10 miles per dollar each time you spend.
With specialised cards, you need to ensure you’re using the right card for the right merchant(s), but the good thing is that these cards usually do not require a minimum spending. You can spread out your expenses across different cards.
