Singapore – Miles vs Cashback Credit Cards – Which path should you take?

WARNING: Long post – ended up being a 2.5 hour write up!

I’m not here to review specific Credit Cards (yet).

Read the section on “Comparison of Asia Miles & KrisFlyer programs relative to Cashback Options” for the section on how to value Asia Miles and KrisFlyer Miles.

Read “Conclusion” for my attempt at a TL;DR!

---

This is my attempt to guide you to pick either:

• Cashback Credit Cards.. or
• Miles Credit Cards
• Both?

My conclusion of having lived in Australia and now Singapore is that things are probably going to be quite the same anywhere that there’s competition and there are options – that is, the best way to maximise your return is if you have as much as you can in everything. It’s also generally the case that the more effort you put in, the more you’ll be “rewarded”. Whether or not the rewards are worth the effort vary from deal to deal (or card to card).

What does “as much as you can in everything” mean? It means you have Cashback Credit Cards where it makes sense, and you have Miles Credit Cards where it makes sense. So.. you have both!

Why does this matter? Because the market is complex, there is competition, and we as consumers have options. It also means merchants have a multitude of options for which banks/apps to partner with. That is the beauty of a (relatively) free market, with competition aplenty and therefore options aplenty. This is also why Restaurant A has a deal with OCBC whilst Restaurant B has a deal with both Mileslife and Citibank. Oh, and then Restaurant C might have a deal with AMEX.

Let’s get into more detail.

Miles Credit Cards

Within the space of Miles Credit Cards, you generally have two options:

• Earn your bank’s proprietary points (e.g. DBS/Citibank/Maybank’s own points system – which can then be transferred to a variety of Frequent Flyer Programs of your choosing)
• Earn direct into, most commonly, Singapore Airline’s KrisFlyer Program

The two different systems have their own sets of pros and cons. I haven’t quite made up my mind which one I believe is better, except to say (as is typical of me) that you should get whatever card earns you the highest rate of miles at whatever merchant – and this likely means getting more than just one card.

Bank’s Proprietary Points

Pros:

• Flexible – you earn into a bank’s program, so you can hold onto it before transferring it out to a Frequent Flyer Program, which depending on the program, will initiate a countdown timer for the point’s expiry
• Usually no expiry of points whilst the points stays within the bank’s own rewards system – either that, or a more lenient system of expiry
  • I haven’t quite looked at all the different proprietary programs in Singapore in enough detail as yet to verify whether this is entirely the truth. I know this isn’t always the case, but at the very least, it doesn’t change the fact that keeping the points away from a program like Cathay Pacific’s Asia Miles or Singapore Airline’s KrisFlyer prevents the expiry timer from starting
• Generally, a higher “mpd” (or miles per dollar, as they like to call it here – aka. pts/$) rate than the direct-earn cards

Cons:

• Indecisiveness – the multitude of options might leave you in a situation where you’re confused and unsure what you actually want to do with your points. Personally, I believe having options is a good thing, but I am wary that for some people, it means having more to think about
• There is usually a transfer fee for initiating a transfer, which varies from bank to bank.
  • Some banks waive this fee for cards above a certain tier – I guess the thinking is, “well, you’re a valuable member so we’re going to waive some fees for which we otherwise charge”
• It takes time (generally, at least a few days) for your points to arrive into your desired Frequent Flyer account
  • This may become a problem if you have looked for a redemption, decided to then transfer points to make said redemption, only for the availability for this desired redemption to disappear whilst you were waiting for your points to arrive
  • Alternatively, some Frequent Flyer programs may offer you the ability to “hold” a reservation without having the points in your account, but this is usually at the discretion of the Customer Service Officer assisting you and varies from program to program, or from redemption to redemption

Direct-Earn (into a Frequent Flyer Program) Credit Card

Pros:

• Minimal waiting time for points to arrive in your Frequent Flyer Account. They will generally get sent over in one monthly sweep every month, generally timed with your Credit Card statement
• No transfer fees for initiating a miles transfer

Cons:

• No flexibility around the timing of the “sweep” of your points. Imagine you’re 500 miles short for a redemption and you’re waiting for a monthly sweep in which you’re expecting 1000 miles to come through. At least in the case of the option above, you can choose to initiate a transfer now, whereas if you’ve literally just missed a monthly sweep, you’re likely having to wait almost another month.
• Expiry of your miles starts immediately – or, to be more precise, as soon as your miles get sent over to the Frequent Flyer Program.
  • Not as big a concern with programs like Qantas Frequent Flyer/Virgin Australia Velocity – but given their lack of presence in Singapore, the bigger concern is around KrisFlyer and Asia Miles.
• Lack of flexibility – you can’t “convert” your points from one program to another, so your KrisFlyer Miles cannot become Asia Miles
  • It is possible to transfer KrisFlyer Miles to Velocity Points and vice versa, at a ratio of 1.35:1 (regardless of direction), but this transer doesn’t really make (value) sense in the KrisFlyer -> Velocity direction. It can make sense the other way though.

Cashback Cards

Again, there are two kinds:

• Universal “1.6% off all expenditure”
• “6% at Sheng Siong, 20% at Petrol at SPC, 1% at SP Group, 10% on dining (online delivery only), 10% on Grab” – “categorised” cashbacks

The second type is more common than the first type, and is the reason I feel the Miles-earning Credit Cards in Singapore are more straightforward than the Cashback earning ones. But the Universal “1.6% cashback on everything” is as straightforward as you can get, because it saves you from then having to calculate the value of miles you might earn as an alternative.

The first type is easy to explain. For every single thing you purchase using the first type of card, you’re getting an effective 1.6% discount. The card I am referring to is the Maybank FC Barcelona Visa Card. With this card, there is no minimum spend and no cap on the amount of cashback you can earn.

The question here then becomes – is it better to get 1.6% cashback, or get something in the realm of 1-2pts or 1-2miles/$? This is where things get tricky and subjective, because it depends on you as an individual and your circumstances. This is where I’d point you to my post on How to Value Points for Flights, or How to Value Points for Gift Cards.

Personally, I think getting a consistent 1.6% cashback is more valuable than earning 1-1.2 miles/$. Cash is king.

Comparison of Asia Miles & KrisFlyer programs relative to Cashback Options

Consider the table below.

Assumptions/Callouts:

• You’re using a Credit Card earning 1.2mpd
• The points will be transferred to Asia Miles, which is Cathay Pacific’s program, and allows you to redeem flights on oneworld airlines
• The redemption figures above do not factor in taxes (some examples below) that you have to pay for the flights – which can vary generally from $20-300. This can vary by destination, program, operating airline, and class of travel.

The point I’m trying to highlight is that for an expenditure of $16666, you’ll earn the necessary miles required to get a return ticket to destinations like Hong Kong and Bangkok. Or spend $25000, and you’ll get enough to fly to Perth/Colombo. How much does a return ticket to Hong Kong, Bangkok, Perth, Colombo normally cost? You can then complicate it a bit more and ask additional questions such as…

• Sale fare, or for regular fares?
• Are we talking about a budget airline or a full service carrier?

These are reasonable questions. So let’s put some numbers to these questions and see what we get.

See, the values differ, and it depends on your flying habits. For example..

• Are you the type who is willing to fly budget carriers?
• Do you have any inteest in flying to Perth?

It’s hard to put a blanket value on points.

Going back to the figures above, the alternative would’ve been that you spent $16666 or $25k on a card like the 1.6% cashback card, and got yourself $266.66 or $400 in cashback. Hang on – I mentioned that the tables above did not factor in tax costs.

Refer to the table below for the points cost via Cathay Pacific’s Asia Miles program, and the airline you’d looking at flying.

As I mentioned above, one of the determining factors of the tax cost is the program. These figures would differ if using KrisFlyer.

Conclusion – So.. are Miles or Cashback Cards better?

It sounds very cliche, but you need to consider your circumstances.

It’s really not meaningful for the conclusion from this to be, “redemptions to Colombo on KrisFlyer, and only Colombo on KrisFlyer are more worth compared to using cashback cards” because:

• You may have 0 interest in visiting Colombo
• Even if you do, the flights may not be available on your desired dates
• You may want the flexibility in not locking yourself in to a KrisFlyer card – but that’s ok – there are the flexible points cards for that!

On the other hand, you may have a loved one in Colombo that you do intend to visit frequently over the next 2 years – and now this changes the equation completely. Go and rack up (and use) your points on redemptions to Colombo!

There is then the added complications of the market potentially changing. For example, maybe Scoot/Jetstar may launch a Singapore to Colombo service in the near future, which would push prices down on this market and by extension erode the value of your points. On the other hand, you might have Singapore Airlines pull out of Colombo completely, therefore severely reducing your perceived value of KrisFlyer points and/or somewhat increasing the technical value of your Asia Miles for redemptions on Sri Lankan, whilst also reducing the availability on the route due to reduced competition.

You may also have either KrisFlyer or Asia Miles completely revamping their program and introducing some sort of new surcharge on partner carriers, or increasing the cost of redemptions on certain routes – and what if Colombo is one of the affected routes? The Freuent Flyer game is an extremely complex, intricate game you’ll be playing.

However, it is for this reason that the general recommendation is always to not “save up” your miles. It’s not like you can invest them, earn interest on them or grow them (by having more of them) in any tangible way – let me know if you know of something and I’m wrong! So – if you’ve got points, use it.

I make it sound like cashback is better than miles. Why are miles cards so sought after?

Because there is value in them and they can be more lucrative than cashback cards. For example, if you fulfil any of the following criteria, chances are you probably would get more out of 1.2mpd than 1.6% cashback!

• You would ordinarily pay for Business Class anyway
• You don’t fly budget carriers
• You are not too flexible with dates/times – which means you don’t have the luxury of picking an alternative date/time, even if it means saving money.
• Even when you do lock in tickets, you sometimes need to change dates/times.
  • Redemption tickets (i.e. airfares purchased with points) tend to be more flexible than your average economy sale fare – either that, or the cost to make changes is cheaper.

Also – tell me what sounds more appealing:

• You can earn 1.6% cashback on all your expenditure
• You can earn Frequent Flyer Miles which will allow you to redeem free (Business Class?) flights on Singapore Airlines

Telling someone you can get free flights just sounds more appealing than 1.6% cashback, even if your hypothetical/calculated return on your miles cards is 0.5%. Not to mention – 1.6% just sounds so insignificant. Miles cards are never marketed as “0.5% cashback equivalent”, even if it may be the case!

0.5% is less than 1.6%, you say? Yes it is, but hey, “at least it gives me free flights and flights are expensive”. It’s irrational, but we’re humans and that’s what we can be – irrational.

---

Using the tables and figures above, you should be able to compare how many points you require for a given redemption, and therefore how much (in dollars) this requires you to get there. You can then compare that to the amount of cashback you would’ve received had you used a cashback Credit Card instead.

Personally, I believe having cashback Credit Cards gives you the flexibility to use the cash on what you want, when you want, and this is why I’ve decided that out of the 4 options:

1. Flexible Miles Credit Cards
2. Direct-Earn Credit Cards
3. Universal Rate – Cashback Credit Cards
4. Categorised Cashback Credit Cards

The 3rd option is the easiest and simplest for your average person who wants less headache/admin. A universal 1.6% cashback with the Maybank FC Barcelona Visa Card is a really solid option. If you’re willing to put in the effort, figure out what your travel plans are likely to be and what the most optimal redemption options are given your travel plans are, then you should definitely consider the miles-earning Credit Cards – because the 1.2 mpd you earn could be more lucrative than 1.6% cashback.

Beyond that, the Categorised Cashback Credit Cards could well be even better – but they pretty much all have minimum spend requirements (sometimes per category) and maximum cashback amounts (again, sometimes per category). Personally, even someone as dedicated as me to “hacking” the game has found the game of Categorised Cashback Credit Cards simply too much to track for too little return. The Categorised ones would be great, if it weren’t for the minimum spends etc., but it really does make a huge difference to how easy it is for me as a consumer to reap the benefits to the maximum. If you’re game enough to do it, go for it. You’ll be rewarded accordingly with much higher cashbacks than 1.6% across the board!

By the way – there are also miles-earning cards that are categorised. However, they don’t tend to be as fragmented as cashback cards. The “worst” fragmenting I’ve seen is overseas vs local expenditure, and/or bonus points on Singapore Airlines expenditure or Grab expenditure.

---

Well, that was a long one. Let me know if you’ve got any questions – I would not be surprised if fresh questions have been triggered from reading this. Ask away!