Cash Back vs Points to Vouchers / Miles – What is the Best and Smartest?

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Credit Card - Cash Back vs Points

So it comes to the end of the month and your credit card points are expiring. So which do I choose,

  • Change them to vouchers where I can get immediate rewards; OR
  • Change them to miles, so that I potentially use the miles to redeem a flight; OR
  • In the first place, I should be spending on a cash back card so that I can get straight forward cash back rebates instead

 

Summary

Overall Comparison: Rebates from various redemption methods

Summary of Redemption - Cash Back vs Points

*: Only flights on SQ were compared in the analysis

 

Cash Back vs Points: Key Takeaways
  • Points to Miles. If you accumulate points, never convert points into vouchers as converting the points into miles will enable you to achieve a higher amount of equivalent rebates as compared to swapping points for vouchers.
  • Direct Credit Card Cash Back Rebates can be worthwhile. Especially for petrol cards. And even as these cash back rebate cards usually have more conditions / requirements other than just “themed” expenditure for points multiplier cards, the benefit is that, compared to the accumulation of points, you get almost immediate cash rebates off your next bill as compared to a delayed rebate by swapping points to miles and then spending it on a flight ticket only when you decide to travel a year down the road – this may be more appealing for some.
  • Redemption of Miles. Overall however, redemption of miles may potentially give you a better equivalent rebate particularly if you compare the savings you get against a normal ticket that you buy from SQ. You may get equivalent rebate of as high as 10% – the highest compared to using direct cash back rebate cards or redemption of vouchers.

Please read more below to find out more.

 

Analysis

As a strong advocate of using credit cards (with rationale in my first article here), my question for the longest time was what I should do with my points that I have gathered or should I be using a cash back rebate card in the first place?

This was even more intriguing as some friends would swear by redemption of miles. But was this really better mathematically?

With that in mind, I tried to plough through data and in fact, the analysis is a not as straight forward as I thought it would be. The details below attempts to have a better understanding of vouchers, miles vs cash back rebates – and which you should choose!

 

(a) Points to Vouchers: Let’s look at the most straightforward of that lot and look at vouchers first
  • 10x Multiplier Cards. The best possible situation when using “point-collecting” cards is to attain the 10x multiplier and this is the highest value you will attain out of all the available cards by spending on certain “themed” expenses specific to the card. Other than the Amex Charge card that has a 13.5x multiplier on selected merchants only – very limited merchants and the HSBC Advance Visa Platinum, where the promotional period for the 10x multiplier seems to end on 31-Jul-2015, for the other credit cards that offer the 10x multiplier, the range of expenditure required to get a $10 voucher is from $360 to $375. This represents a percentage equivalent rebate of about 2.8% on amount spent ($10 / $360).
  • Non-Specific “General” Expenses. The Privi Miles American Express card allows all general expenditure to attain the ~4x benefit and offers the next highest general expenditure rebate of a $10 voucher from $1,054 spent. This translates to a not so exciting percentage equivalent rebate of 0.9% on amount spent ($10 / $1,054).

Please see here for the best points cards in Singapore

(b) Direct Cash Back Rebates: Clear Straightforward Rewards

 

  • Petrol Expenditure. For petrol expenditure, you have to use a rebate card that gives you about 20% cashback. This is the most beneficial.
  • Better than Vouchers. Using cashback cards give you better benefits than points card unless you change your points to miles. Cash back rebates  typically range from 3% to 10%, significantly better than the 2.7% equivalent rebate that you can get from the accumulation of points and changing to vouchers.
  • Low cash back rebates if requirements not met. Generally more difficult or more numerous requirements for cashback cards. If you spend outside the specific card merchants, categories or don’t meet certain expenditure requirements, the cash back rebates that you get will be between zero and 1%, significantly lower than the accumulation of points to exchange for vouchers.

Please see here for the best cashback rebates cards in Singapore

(c) Miles: Range of benefits

The benefits for using miles is a bit more complex as there is a variable element when determining flight cost depending on the time that you book the ticket. Moreover, there is also a cost element when using miles to redeem flights – you still have to pay for tax and surcharges that can amount to quite a significant sum. The flight cost can vary considerably from (a) promotional fares – cheap; (b) normal fares – mid range prices; and (c) last minute fares – that can be substantially more expensive.

 

Comparison of Promotional Fare Savings vs Normal Fare Savings using Miles instead of directly buying the ticket on SQ

Comparison of Promotional Fare Savings vs Normal Fare Savings using Miles instead of directly buying the ticket on SQ

Note: Only flights on Singapore Airline (“SQ”) used as comparison with 4 common routes chosen. Do note also that flight costs above are based on the price for SQ tickets when the article was written and that flight costs vary across time.  

 

Equivalent Percentage Rebates based on Cost Savings from usage of Miles to buy SQ tickets

Equivalent Percentage Rebates based on Cost Savings from usage of Miles to buy SQ tickets

*: We have assumed that we are able to spend on expenditure so as to meet the 10x multiplier criteria

^: Percentage equivalent rebate based on the amount saved divided by the expenditure to achieve the miles

 

Miles: Key Takeaways
  • Promotional Fares vs Normal Fares. The difference between savings from promotional fares – 2.9% to 3.8% to normal fares – 7.3% to 10.2% can be substantial. Direct cash back rebate cards can be better than equivalent rebates from points to miles should you be comparing the promotional flights
  • Generally Longer the Better. Generally, it is better to use miles to convert for longer haul flights as compared to shorter haul flights as the cost savings that you have are more substantial when you convert miles for longer flights. Though, this is generally the case, there are exceptions to this as shown above the route for Singapore to New York (19hr flight) has less savings than the route from Singapore to London (14hr flight). Surprisingly, this general rule of thumb may not always be true all the time and may vary according to routes.
  • Booking in Advance. Both promotional fares and using miles to book for flights need you to book way in advance – likely at least 3 to 6 months in advance for a good timing. However, promotional fares may have certain stricter requirements that may be somewhat more restrictive such as requirements to book 180 in advance, stay a certain period and of course being promotional, they are only available for a certain period of time.

 

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