The ugly truth of cashback cards banks don’t want you to know

Sorry about the click-baitish headline, but there’s something you need to know. A friend pointed me to an article by GET.com on the best cards to use for dining, a toss up between the OCBC 365 and the ANZ Optimum Card. That led me to think more about cashback cards and why GET.com was promoting them so heavily

There is a reason why I don’t like cashback cards- you can’t win. Try and get a bank to part with cash, and it will bend over backwards to stop you from doing so. The entire cashback game is a mirage- it lures you in with exciting headlines, but ultimately disappoints.

Don’t believe me? Let’s look at the terms and conditions of some of the “best” cashback cards on the market

Card Cashback Promised BUT…
ANZ Optimum World Card
  • 5% on one category- groceries, shopping, dining, travel
  • 1% on everything else
  • Limits this to $30 per transaction. If you are buying a big ticket item worth more than $600 (as is the case for say, airline tickets), you lose out
  • The cashback can only be used in intervals of $50, offset against your statement. In other words, until you accumulate $50, you get nothing
OCBC 365 Card
  • 6% on weekend local dining
  • 3% on weekday local/overseas dining
  • 3% on online spending, groceries, telecomms
  • Only if you spend more than $600  per month, otherwise 0.3%
  • Cashback capped at $80 per month
Citibank Dividend Card
  •  5% on groceries and pharmacies
  • 2% on dining
  •  Minimum spend per transaction of $50, otherwise 0.5% cashback only
  • If grocery store offers CitiRebates, you only get 3% cashback and the other 2% is awarded in CitiRebates usable on your next transaction only
American Express True Cashback Card
  • 5% on everything for the first 3 months
  • 1.5% everywhere else with no caps
  • 5% first 3 month promotion capped at $250
  •  AMEX does not waive annual fees, so after the first year you need to pay $171- meaning you need to spend  at least $11,400 on this card just to break even!
  • EDIT: Some people have reported successfully getting AMEX to waive their annual fees. For what it’s worth, AMEX didn’t waive mine on the AMEX Rewards card (spent $1.5K total in a year)
UOB One Card
  •  3.33% on all spend
  • 5.33% on overseas spend
  • 3.33% is theoretical-you need to spend at least $900 per quarter to qualify
  • Your rebate moves in steps- it’s either $30, $80 or $150, depending on spend. So even if you’re just shy of the required amount, you’re bumped down to the next lowest
  • 5.33% on overseas spend is capped at $5,000 per year
OCBC FRANK
  •  6% on online transactions
  • Lengthy exclusion list of online transactions which don’t qualify
  • Minimum spend of $500, capped at $60 per transaction, otherwise 0.5% cashback
  • Annual rebate capped at $720
POSB Everyday Card
  • 6% on  “everyday partners”
  • Everyday partners list limited to 6 merchants
  • Cashback at Sheng Siong is capped at $1,000 per month
  •  0.3% cashback on everything else

A general point applies to all cashback cards- if they don’t waive the annual fee after the first year, you’re already starting off significantly in the red as you try to earn back the annual fee through your spending.

Yes, miles cards also may not waive the annual fee post the first year, but they at least offer renewal gifts like bonus miles (which can be good value in some cases)

If you want the certainty of cash as opposed to the variable value of miles and points, you’ll pay for it, literally. Please don’t play the cashback game. There is no win here for you. The banks have carefully calibrated the payout ratios and T&C such that you’ll always be on the losing end.

Remember- the banks don’t care how you spend your miles. That’s a problem for the airline. They do care how much cash they have to give back to you though!

cover photo: taxrebate.org.uk

 

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14 thoughts on “The ugly truth of cashback cards banks don’t want you to know”

  1. Who says Amex doesn’t waive annual fees? It took me less than 1 min over phone with customer care to waive annual fees fully. This was my first year at Singapore and first year with Amex, and haven’t spent more than 10-15k.

    1. yup you’re right, they do. i was basing this on my experience with the amex platinum cards, but i’ve heard anecdotal evidence from people with krisflyer ascend that they got theirs waived too. will update.

  2. I’ve used the One card for many years and they’ve always waived the fee for me.. i charge an average of $300 a month..

  3. For banks that offer even a 0.5% interest per annum on bank bal (up to S$60K for OCBC) for a monthly spend of $500 (ocbc), that an annual $300 of interest earned.

    Taking into account $0.04 dollar to mile rate, that’s like 7,500 miles.
    For me, $500 min. Spend is easy and the 7.500 miles seem like a great head start for these cards. I think such cards are positioned way ahead of peers. (Miles/ cash back)

    Maybe some people think $60K is wasted as liquidity in a savings account but I think that’s decent cash on hand.

    What do you think?

    1. sorry- what do you mean by $0.04 dollar to mile rate?

      regarding the broader question you’re asking- yes, i can understand that some people would rather have cash in hand and if it works for you go with it. now that ocbc has relaunched the titanium card it is somewhat easier to justify putting spend on their cards (although you might end up with orphan miles if you don’t spend a lot on online shopping)

  4. Hi

    What about the HSBC Visa Plat? or the HSBC Premier.

    They offer decent rebate levels ( for petrol, bills and groceries) + points though they have some restrictions 800 min spend + 120/qtr max rebate.

  5. SCB SingPost offers 7% cash rebate for online purchase with min monthly spend of sgd600 and cap at sgd60 rebate per month.

    BOC Family offers 5% cash rebate for online purchase with min monthly spend of sgd 500 and cap at sgd111.11 rebate per month.

  6. DBS Live Fresh has been offering 5% cash back for online, pay wave purchases with minimum spend value of $700

    I find it more useful to earn 5% cash back rather than earning miles especially when I buy flight tickets which usually exceeds $700 for a family. Whats your opinion?

    1. I do like the livefresh card actually because it lets you earn miles and cashback. don’t you earn 1.2mpd normally?

      1. Nope, it doesn’t provide miles. It offer 1 DBS pt for every 5$. 5,000 DBS pts can be redeemed for 10,000 KFmiles. But, there is a catch. Need to pay $25 per transaction for conversion of pts to miles.

        1. what i meant was they offer 3x points (1.2 mpd) on online and paywave purchases. so you do earn both 5% cashback and 1.2 mpd.

  7. The new HSBC Advance Visa (no annual fee) gives 3.5% for monthly spend of $2,000. A decent cashback deal in my opinion.

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