In order to determine whether a miles card or a rebates card provide a greater value, we can compare the value generated at different levels of spending. Below is the amount of value generated at different level of spending.
Determining Value of Rebates Card
The value of a rebates card would be the amount of rebates that can be returned to the cardholder based on the individual’s spending. Let’s take a look at the top few rebates card that most people have.
UOB One Card generate rebates on a quarterly basis. A minimum of 3 months consecutive monthly spending of S$500, S$1,000 and S$2,000 will generate a rebate of S$50, S$100 and S$300 respectively in the 4th month. This translates to a 3.33% rebate amount for minimum S$500 and S$1,000 case while the highest minimum monthly spend of S$2,000 will provide a 5% rebate, that is spending is kept at the minimum amount. Any additional spending above the minimum amount will reduce the rebate percentage. Hence, the maximum possible rebate value you can obtain from the card would be S$100 per month (S$300 / 3 months). The card also requires a minimum of 5 purchases per statement period.
OCBC 365 Card requires a minimum spending of S$800 per month to generate rebates based on categorical spending which range from 0.3% to 24.6% (as shown below). Any amount less that S$800 will generate a flat 0.3% rebate. However, regardless of the rebate percentage, the rebates amount is capped at S$80 per month.
Source: OCBC Bank
American Express True Cashback card provides a flat 1.5% rebate on spending with no minimum spending required and no cap on the rebate value.
Determining Value of Miles Card
The value of a miles card spending will be dependent on two components, the miles card earn rate which we will seek to maximise and redeeming of air miles for the air travel which we will seek to minimise.
Miles Earning
Miles card spending will earn the Bank’s reward points which can be converted into air miles to be used to redeem for an air travel. Two biggest air miles programme would be Singapore Airlines Krisflyer where Krisflyer miles can be used on Singapore Airline and its 27 other Star Alliance partners while the Asia Miles programme can be used to redeem air travel on Cathay Pacific and its 14 other One World Alliance partners.
Different miles card will earn different miles accrual rate and the industry high would be at 4 miles per dollar. Categories that provide the opportunities to yield the industry’s high of 4 miles per dollar would be in Contactless, Online and Foreign Currency Transactions. Given the abundance of contactless and online transactions, it would have covered a majority of our spending which means earning the 4 miles per dollar rate would be easy. The remaining transactions will fall under general spending which will earn 1.4 miles per dollar with the right card. Hence we can conservatively estimate the miles earned per dollar to be 3.22 miles (70% of 4 miles per dollar and 30% of 1.4 miles per dollar).
Miles Redemption
The second part of the equation is to determine the value of an air mile by dividing the fair value of the air travel destination with the miles required to redeem the air travel. Based on Singapore Airline’s Krisflyer award chart, some of the top favourite destinations reveals that value per mile differs according to destination and the class of travel.
There are some “sweet spots” in the award chart that provide greater value per mile but in general a higher class of travel will reap a greater value per mile. We can conservatively estimate the value per mile to be 2 cents by taking the highest value per mile in the economy as a consideration to both economy and the much higher value per mile in Business and First. We will then apply this value to determine the value derived from miles spending card.
Comparing Rebates and Miles value
By taking the highest rebate value among the top 3 rebate cards in Singapore and comparing with the mile card valuation of 3.22 miles per dollar earn rate and 2 miles per dollar redemption rate, we find that:
- Rebate card has a slight greater value at lower spending tier of S$1,000 per month
- Miles card beats Rebate card at all other spending tiers
The miles value has been conservatively estimated as it underestimate business class redemption miles value and methods to minimise miles utilisation has not been applied. In addition, miles card is generally good for big spending items with other benefits that comes along with it such as Lounge Access and Travel Insurance.
Hence, if you do travel out of the country at least once a year and spend more than S$1,000 a month, a miles card will provide a greater value than the rebate card. A S$2,000 a month spending will be sufficient to redeem a return economy to the United States or a return business class in Asia such as Taipei.
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