Credit Card Overview

2016-07-14

What Credit Cards Should I Get?

This is the most common question people ask me. And the answer, of course, is “it depends”

The first and most important question is- what are your objectives?

Are you interested in getting cashback on your spend? Are you keen on turning your spend into flights and holidays? Do you want cards that give you special “lifestyle” privileges, eg access to clubs, private concierge, illuminati initiation ceremonies?

It goes without saying that you should absolutely be using a credit card wherever possible. Every time I see someone pay with cash, NETS or a debit card, I die a little inside, because that’s basically wasted spending. If you’re going to spend money, might as well get something out of it.

Fixed vs Variable Rewards Cards

Rewards credit cards can be broken down into 2 main types

  • Cashback Cards
  • Miles and Points Cards

As you may have already guessed, my bias is towards miles and points cards. This dichotomy can also be described as follows

  • Fixed rewards cards (Cashback)
  • Variable rewards cards (Miles and Points)

Fixed rewards cards, as the name suggests, offers you certainty. If I own a cashback card, I know I will get back x% of my spend in the form of a statement credit. I may get different percentages depending on what category of spending I do (eg groceries may get 3% cashback while fuel gets 5%), but the value of what I get out of the transaction is fixed. $1 is $1.

I’m not a big fan of cashback cards because of the relatively small rebate % as well as the multitude of conditions attached. The UOB One Card promises in big bold letters to give you 3.33% cashback on all spend, but neglects to mention that you have to spend a min of S$300 a month to get that. The ANZ Optimum World card promises 5% cash rebate with no minimum spend, but mentions in the fine print that this rebate is capped at $30 per transaction (meaning that a S$600 transaction will earn the same cash back as a S$6,000 transaction). The Citibank Dividend card promises big cashback savings on all categories of spend before casually mentioning the earning is capped at S$800 per annum.

Variable rewards cards, on the other hand, give you their own currency (eg DBS Points) or an airline’s currency (eg Krisflyer miles). Why I call this “variable” is that the value you get depends on how you spend it. For reasons which I’ll explain in a subsequent post, the value of a mile depends on what you redeem it for. All things equal, a mile applied towards a first class redemption will be worth more than a mile applied towards an economy class redemption. In theory, you could get as much as S$0.07-0.08 value per mile, if you redeem them correctly.

So comparing the two categories of cards.

Fixed Rewards Card Variable Rewards Card
Gives you Cash Points or miles
Rebate range* 1-6% 2-28%**
Examples Citibank Dividend CardUOB One CardANZ Optimum World Card Citibank Premiermiles CardUOB PRVI Miles CardANZ Travel Card

*I have not considered merchant specific spending rebates (eg using a UOB Preferred Platinum Visa Card at Coffee bean gets you 10% cashback, and using a Citibank PremierMiles Card at Kaligo gets you 10 miles per S$1, but this is not an accurate reflection of rebates arising from everyday spend)

**Certain categories of spend earn 4 miles per S$1. Assuming a theroetical maximum of 7 cents per mile, that’s S$0.28 of potential value

Of course, since the value you get depends on how you spend your miles, variable rewards cards require a bit more thought and micromanagement than fixed rewards cards. If you’re willing to invest that time, however, the incremental value can be tremendous.

Let’s look at general spend vs specialised spend cards.

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