Last Updated: 20 January 2018 – I’m including a link to a post by Singaporean Finance Blog, Budget Babe, “The value of a mile vs. the value of your time #TeamCashback” as I’ve been quoted here.

[Response/Opinion] Cashback vs Miles in Singapore – Cashback Can Win – Response to Aaron Wong’s (MileLion) post on SingSaver

I wrote about a similar topic not long ago, but I’ve been inspired to write about this again.

I have been inspired to write this after reading Aaron Wong/Milelion’s post about his take on miles vs cashback.

First, I’d like to show my respect for Aaron and his blog, The MileLion. I’ve only been in Singapore for 5 months, but in this short period, The MileLion has already become one of my most frequently visited websites – for the same reason Point Hacks and AusBT were two of my most frequently visited sites in Australia. They’re all extremely educational, engaging websites/blogs that post plenty of content I (and many others, I’m sure) can relate to.

If anything, I actually think I prefer Aaron’s writing style – because it has a personal touch that Point Hacks (and certainly AusBT) don’t seem to have. He’s also not scared to call rubbish out – which is extremely refreshing. KrisPay, Standard Chartered Rewards+, Response to ipaymy’s allegations – see, it’s not all about the good! This is not a dig at Point Hacks/AusBT – I just think they’re written for different audiences.

Despite my respect for him, I am writing to to respond to some aspects of his post on SingSaver. Considering he runs MileLion, it is no surprise that he prefers miles over cashback, and I totally understand why. In addition, I want to acknowledge and emphasise the pronoun he uses to write the post, “Why I prefer miles over cashback..”

In summary, here is what I wish to achieve:

• To “defend” cashback cards, somewhat. I believe cashback cards deserve a little more respect than the article showed. Whilst it was never explicitly stated that miles are better than cashback, I think the overarching message is quite clear.
• To provoke further discussion on the topic of Miles vs Cashback
• To show “the other perspective”, which I don’t think his post covered adequately

Tabulated breakdown of Cashback Chasers vs Miles

Source: The post

At the heart of it, cashback chasers are value-seeking . Miles chasers are aspiration-seeking.

Value-seekers play the short game, believing that a dollar saved today is worth more than a dollar saved tomorrow. This group therefore prefers the immediate, tangible reward of cashback — you spend money, and straight away earn some of it back.

Aspiration-seekers play the long game, believing that it makes sense to forgo the immediate rush of cashback in favor of a long term payoff. This group knows that although it takes a while to accumulate a critical mass of miles, the eventual reward of a free First or Business class ticket makes it all worthwhile.

This statement comes back to a fundamental necessity to understand the miles game, which Aaron has acknowledged:

the miles game has a learning curve

However, this is precisely why I think to say “this group knows the eventual reward makes it worthwhile” is quite misleading.

As someone who has been heavily invested in the game of miles-earning and Credit Cards for over 5 years, this is my observation of some of the characteristics you should possess for the miles game to be really worthwhile:

• Aspirational – exactly what Aaron said – you aspire to fly in Business Class and First Class. You want to experience it.
  • Or – even better – you would actually pay retail price for Business/First Class tickets. If you do, you can actually stop reading here – because this alone is a strong enough reason for points to be worth it for you.
  • The rational me argues that rationally, it generally doesn’t make sense to pay real retail fares for Business/First Class (on long-haul flights – where they actually make a difference). The dollars saved by flying Economy can be “re-invested” into making your holiday even more comfortable by paying for a more luxurious hotel. If you end up saving $2000 on a SIN-SYD return kind of flight, think about how many additional nights of accommodation $2000 could buy you.
  • For a discussion on this, see the comments in this Reddit post about the rough value of 1 Qantas Point in 2018.
• Lavish spender
  • This doesn’t mean rich. This refers to one who doesn’t think too much about the cost of things before they spend.
• Flexible – time-wise and experience-wise
  • Particularly time-wise, but also experience-wise. If you have no time (work multiple jobs, have children), then you actually don’t have the opportunity to go on extensive breaks to make the most of your flight redemptions. The lack of flexibility when it comes to availability of flight redemptions also means you don’t have the ability to shift your dates a few days either side of your intended dates
• Spontaneous
  • You’re the type who is pretty happy to plan trips last minute
• Adventurous
  • You don’t care whether you go to Jamaica, Hong Kong, Cuba, or Egypt – you just like going to places and don’t have strong preferences
• Strong preference to fly Full Service Carriers
  • If you’re the type who is happy to fly from A to B on budget, it can significantly erode your effective/perceived value of points
• No access to Airline employee perks
  • I say this because those who either work in airlines themselves, or whose direct family work for airlines, often have access to industry benefits which further erode the effective/perceived value of frequent flyer points/miles
• Reasonably high tolerance for “admin”, or have genuine interest in the “miles” game. To put it another way, you’re willing to put in the hard yards, both to learn how to earn the most miles and to use miles.
  • As the miles game does indeed have a learning curve, it therefore requires quite some effort to actually understand it. This means someone telling you to earn miles “because they’re good” is not good enough – you also want to know how to use them, and this takes effort.
  • Aaron does mention this – I’m just emphasising it because this is important.
• Patience
  • As Aaron acknowledges, you’re playing the “long game”. I recently posted a real life example of how “long” this “long game” can be.. or to put it another way, that the “long” game may actually be a bit longer than you think.
• Genuinely enjoy flying
  • I say this because, sometimes, getting more value out of points requires a transit or two. As someone who actually enjoys flying, I see this as a way to “stretch” the value of my miles. This means the longer the duration (up to a certain point, of course), the more value I am getting out of a redemption. If you, however, prefer direct flights, whether it be because you’re time-poor or you just don’t enjoy flying, then this could work the other way – it diminishes the value.
  • It can, however, be argued the other way. If paying cash, transits almost always make your airfare cheaper. Having points may allow you to redeem a direct flight for cheaper than the equivalent cost to buy a direct flight with cash.

There are potentially some more characteristics/aspects I could touch on here.

• What if you do fulfil the criteria above, but you have a partner who you spend a lot of time with who isn’t like that? Depending on the nature of your relationship, you might still be stuck because you tend to do things together. It’s not all about your preferences!
• “Focusing” on miles can take away your ability to take advantage of great sale fares/mistake fares. Whilst the relatively fixed prices of redemption flights is one of its greatest benefits, it can also be detrimental when compared to sale fares and/or mistake fares
  • Mistake fares are relatively rare, but as an example, it could be something like “Vietnam to USA for $800 USD return in Business Class”
  • This could take us down another discussion – that mistake fares are, in some cases, not honoured by the airline.
• As it requires a level of effort, could you be doing something more with that time? What is your opportunity cost, in terms of time, by learning the miles game?

Does this mean it would be a bad idea to be a miles-chaser if you do not fulfil the above criteria? No, but it certainly has the potential to make it more valuable if you do fulfil as many of the criteria as possible. In fact, I do not fulfil quite a number of the criteria above. I:

• Have access to employee discounts on airfares
• Am not adventurous
• Am not extremely flexible, time-wise, because of a job
• Am not a lavish spender
• Do not have a strong preference to fly full-service airlines
• Do not have strong aspirations to fly First/Business Class travel, admittedly because I’m a money-saver, who sometimes sees it as an unnecessary luxury

As another example, American Express Australia are devaluing their points from 15 April 2019 (AusBT/Point Hacks. This will negatively affect what I think is, in my opinion, one of the best Australian Credit Cards, the American Express Explorer. I’ll post about this separately, but I still think it’s a great card to have. It is probably also still going to be the best generic Credit Card in Australia.

I think you get the point.

Here’s a question: would you be willing to pay S$10,000 for a First Class seat? I’m guessing the answer is “no”, even if you can afford it. Let me ask the same question a different way: would you be willing to redeem 100,000 miles for a First Class seat? Most people would likely say “yes”.

I agree that most would probably say “no” to paying S$10,000 for a First Class Seat. To say that it is likely that most people would say “yes” to using 100,000 miles for a First Class seat seems a bit shallow. This implies people know the value of 100,000 miles.

The real question is – what is 100,000 miles, and what can it buy me as an alternative? As Aaron points out..

The cashback game is simple, because everyone knows what to do with cashback.

i.e. we all know what S$10,000 can buy us, so there is no need to ask, “What can S$10,000 buy me?”

But who actually knows what 100,000 miles can buy you? Aaron does. I do. Point Hacks does. AusBT does. But most people don’t, and will need to ask (if they are to make a real, informed decision), “What can 100,000 miles buy me?”

To actually answer the question – 100,000 miles can buy you Singapore-Houston one-way in First Class with 8,000 miles to spare not including taxes. It can also buy you 13x SIN-KUL flights, one-way, in Economy Class with 2,500 miles to spare, not including taxes, on Singapore Airlines/Silk Air. We could also talk about how SIN-KUL is a one-hour flight and even the most diehard “I prefer flying full service airlines” bunch would probably be ok with flying on a $40-150 Jetstar/Scoot flight without food/water for an hour.

The bolded part, is important. The tax costs are often not mentioned when redemption flights are quoted – primarily because the taxes can vary wildly airline to airline, route to route, country to country. Hypothetically, if the tax cost is S$1,000 (which is actually very high, but not impossible), your 100,000 miles now only “offsets” S$9,000 of your first class seat (using the same figures as above).

I am not aware of any program where you are not subject to pay a tax component. There are programs that allow you to use more points to offset the tax component, but this is often at a poor rate. It often makes sense to pay the tax component in cash.

One needs to think about what happens in the event an annual fee waiver is not granted.

• From the section “Cashback Annual Fees Put You in a Loss Position; Miles Cards Annual Fees Give You Miles”

If your request for a waiver is not granted, you’ll then do something similar to what you’d do with miles. That is – ask yourself, “is paying the annual fee for this cashback/miles card worth it?”

If the answer is “yes” (typically because you’d be a big spender), then do it. If the answer is “no”, then cancel it and move on to another Credit Card. It’s a competitive market – you’re not limited to one Credit Card.

I am in agreement with his argument, but feel that it’s not “complete” in regards to alternative responses to not gettiing the annual fee waiver. You can just walk… and then get another one. There are almost always “first-time sign up” promotions too, so even if you do manage to have annual fees waived, it may still make sense, additionally, to just sign up for cards for first-time sign up promotions. The market is undoubtedly different between Singapore and Australia though; the 2 markets that The Bulging Wallet primarily focuses on.

Paying the annual fee for a miles card (10,000 miles for paying the S$192.60 annual fee on the DBS Altitude Visa) can make sense, but paying the annual fee on a cashback card never makes sense.

I agree – 10,000 miles for paying the S$192.60 annual fee is decent. But as above – don’t pay the annual fee on the cashback card if the waiver is not granted. Change/churn cards.

Is 10,000 miles worth the S$192.60 annual fee? Aaron would say yes, based on 2c/mile valuation. I say no – purely because I value a mile at no more than ~1.5c/mile. However, this doesn’t make either of us more right than the other, which is why I still acknowledge it’s decent. Here’s his take on the value of a mile, while here’s mine for flights, or here for Gift Cards.

Although cashback cards advertise high cashback rates in big bold letters, one important catch relates to minimum spending requirements. These make it impossible to adopt a “best of breed” strategy with cashback.

Absolutely agree. I touched on this in my own post.

The minimum spend aspect of Singaporean Credit Cards does indeed complicate the value in a negative way. I think this would then become a question of, would you rather spend the effort figuring out how much you’ve spent on each of your cashback Credit Cards each month to ensure you’ve met your minimum spend on all of them, or would you rather spend the effort into figuring out how to earn miles, use miles etc.

I’m picking the latter (agreeing with Aaron), because I personally find it a lot more interesting and rewarding – as I’m sure Aaron does.

As I said, I’m not here to dispute everything.

Rant..? If it came across as one, I’m sorry. My regular readers know I love points/miles – but cash is king – and there’s a reason such clichés exist.