Should I use my credit card points for cash rebates?

It’s all good and well to rake in the miles when you can take a weekend trip at the drop of a hat, but how does Covid-19 change the equation?

With travel all but impossible right now, some miles collectors are starting to see their balances as more of a liability than an asset, and exploring Pay with Points or statement rebates as ways of cashing them out.

I frankly think this is a terrible idea in most cases, but understand how the view that “poor value is better than no value” can be attractive.

So let’s take a closer look at these options and how they work, and see if there’s any scenario where they can make sense.

Pay with Points vs Statement Rebate

Before we talk about value, let’s get some terminology out of the way. Some banks offer Pay with Points, some offer statement rebates, others both.

Bank	Pay with Points	Statement Rebate
	✔
		✔
	✔	✔
	✔	✔
	✔	✔
		✔
		✔
		✔
	✔	✔

What’s the difference? Flexibility.

How Pay with Points works

Pay with Points schemes allow cardholders to use credit card points to offset individual transactions of any amount. 

For example, Citibank cardholders may receive an SMS informing them they can offset a particular transaction with points.

Alternatively, they can login to their ibanking and see a list of transactions to redeem points for.

How Statement Rebates work

In contrast, statement rebates only allow for fixed denomination redemptions. For example, OCBC lets you redeem 1,000 Travel$ for a S$10 statement rebate, but if you have a smaller balance than that you won’t be able to redeem anything. 

It seems intuitive that where Pay with Points options exist alongside statement rebates, the value you receive should be on par. However, that’s not always the case.

• Citi and HSBC offer the same value
• DBS and UOB offer different value

DBS Pay with Points yields a fixed value of 1 cent per point. If you opt for a statement rebate, you get anywhere from 0.83 to 1.5 cents per point, depending on the denomination you choose.

UOB Pay with Points yields a fixed value of 1.11 cents per point. If you opt for statement rebates, you get 1-1.15 cents per point. 

Which bank offers the best value?

We can’t do a comparison on the basis of value per point, because bank points aren’t directly comparable- 1 DBS point isn’t the same as 1 OCBC$.

What we need to do is convert points to a common base, like airline miles. We can compare the implicit value you’re accepting for a mile, when you choose to redeem points for cash rebates. For instance:

• DBS Pay with Points values 1 DBS point at 1 cent
• 1 DBS point is 2 miles
• Therefore, you’re taking 0.5 cents per mile.

To further complicate matters, different cards may offer different value. For example, UOB PRVI Miles members can redeem 8,700 UNI$ for a S$100 rebate, but UOB Preferred Platinum Visa members can only redeem 2,000 UNI$ for a S$20 rebate.

In the table below, I’ve listed the possible values you could obtain for several popular cards.

	Value Per Mile
AMEX Platinum Charge	1.54 cents  (promo rate until 20 July, 0.77 cents after)
OCBC 90N/ OCBC VOYAGE	1.0 cents
SCB X Card	1.0 cents
AMEX Platinum Reserve/ AMEX Platinum Credit Card	0.86 cents
SCB Visa Infinite	0.78 cents
DBS (all cards)	0.42- 0.75 cents
Maybank (all cards)	0.74 cents
OCBC Titanium Rewards	0.69 cents
HSBC (all cards)	0.63 cents
Citi Prestige	0.63 cents (promo rate till 30 June, 0.57 cents after)
Citi PremierMiles	0.61 cents
Citi Rewards	0.57 cents
UOB PRVI Miles	0.5- 0.57 cents
UOB Pref. Plat Visa	0.5 cents
BOC Elite Miles	0.2-0.25 cents

Outside of promotions, the best value you could get is 1 cent per mile. That’s a significant haircut compared to what you could earn when redeeming miles for flights, and for this reason I think redeeming points for cash rebates should be avoided at all costs.

Put it another way- if you’re going to redeem points for cash rebates, you might as well have used a cashback card in the first place. The best general spending cashback cards on the market (Citi Cash Back+, Maybank FC Barcelona, SCB Unlimited) will earn you 1.6% flat cashback. Compare that to the OCBC 90N, which earns you 1.2 mpd, or a 1.2% rebate when you factor in the 1 cent per mile valuation.

The picture obviously gets much worse if you’ve earned your points on a Citibank or DBS card, which have much poorer cash rebate options.

So what do I do with my points then?

In a word? Hodl.

While it’s true you can’t fly at the moment, your points haven’t become worthless overnight. We’re seeing early signs of recovery in the aviation market, and even if 2020 is a write-off, I don’t see how this fundamentally changes the equation. You’re not going to stop travelling altogether, after all.

If you’re worried about massive devaluations after Covid-19, you might be interested in watching our recent webinar on Covid-19 and The Miles Game. The consensus among the panelists was that it’s highly unlikely to happen, especially with Asia Miles and KrisFlyer. Devaluations, after all, are caused by too many miles chasing too few seats. Load factors are likely to remain poor in the near term, and the opportunity cost of award seats will be low. This creates an incentive for airlines to open up award space and remove mileage liabilities from their books. 

Conclusion

Tempting though it may be to cash out your points for cash rebates, it really represents terrible value and should only be done as a last resort.

If you’ve already allocated your spending over the past couple of years based on a miles strategy, changing course now would only wipe out whatever gains you’ve been building towards.

So hold on to those points, watch for expiry (if any), and keep the faith.