Credit Card Miles vs. Cash Rebates: Which is Right for You?

When choosing a credit card, consumers are often faced with a crucial decision: should they opt for a card that offers travel miles or one that provides cash rebates? Both rewards programs have their advantages and drawbacks, and the best choice largely depends on individual spending habits and financial goals.

Understanding Credit Card Miles

Credit card miles, often referred to as travel points, are typically accrued based on the amount spent using the credit card. These miles can be redeemed for various travel-related expenses, including flights, hotel stays, car rentals, and sometimes even experiences like tours or events.

Advantages of Credit Card Miles:

1. High Redemption Value: When used strategically, miles can offer higher value per point compared to cash rebates, especially for international flights or business class tickets.

2. Travel Perks: Many travel credit cards come with additional benefits such as free checked bags, priority boarding, airport lounge access, and travel insurance.

3. Sign-Up Bonuses: Travel cards often feature lucrative sign-up bonuses that can be worth hundreds of dollars in travel credits after meeting initial spending requirements.

Drawbacks of Credit Card Miles:

1. Complex Redemption Process: Redeeming miles can be complicated, with blackout dates, limited seat availability, and varying point valuations depending on the airline or hotel.

2. Devaluation Risk: Airlines and hotels can change their reward program structures, potentially devaluing the miles you have accumulated.

3. Annual Fees: Many travel cards charge high annual fees, which may not be cost-effective for infrequent travelers.

Do your own research to understand the different miles rate as a general card gives you about 1.2 miles per dollar, but there are some specific types of spending cards and categories of spending out there that can get you up to 4 miles per dollar.

It also takes quite abit of spending and time to accumulate sufficient miles to a destination outside of Southeast Asia but it could be your chance to earn yourself a business-class ticket on a full-service carrier. Check the frequent flyer programmes by the bank too.

Comparatively, cashback rates are maybe 1.5 to 2 per cent, and some with no minimum spend and other terms and conditions. Others have caps on the amount of cashback such as $80 to $160 etc so do map out if you are planning to spend on big ticket items like a wedding, house, renovation and furniture etc before deciding. Families with children vs. singles will also have a great difference in expenditure to maximise the value from everyday spending.

Understanding Cash Rebates

Cash rebate credit cards offer a straightforward reward structure: a percentage of your purchases is returned to you as cash. Certain categories of different cards offer various cashback rates.

Advantages of Cash Rebates:

1. Simplicity: Cash rebates are easy to understand and redeem without worrying about fluctuating values or restrictions.

2. Flexibility: Unlike miles, cash can be used for anything, providing more versatility when you want to offset your next purchase.

3. No Devaluation: Cash retains its value over time (no accounting for inflation here), unlike travel miles which can be devalued by program changes.

Drawbacks of Cash Rebates:

1. Lower Potential Value: While straightforward, cash back offers typically don't match the high redemption potential of strategically used travel miles.

2. Limited Bonuses: Cash back cards may offer lower sign-up bonuses compared to travel cards.

3. Hard to Track: Different cards have various caps on the categories and you have to manually track how much you spent in the eligible category every month.

Which Should You Choose?

The decision between credit card miles and cash rebates boils down to your lifestyle and spending habits:

• Frequent Travelers: If you travel often, especially internationally, and can navigate the complexities of reward programs, a travel card offering miles may provide greater value.

• Everyday Spenders: If you prefer simplicity and flexibility, or if you don’t travel frequently, a cash rebate card is likely the better choice.

Additional factors to consider for credit card usage include high-interest rates that can negate any rewards earned if you carry a balance, or if you travel internationally, check the foreign transaction fees to avoid extra charges on your purchases abroad. Signing up for a new card can include welcome gifts like travel luggages and other perks too.

Also do remember to set up reminders to check and pay off your bill before the end of the month, or automating your card payments with GIRO.

Ultimately, both credit card miles and cash rebates offer valuable rewards. Assess your financial goals, spending patterns, and travel habits to determine which card aligns best with your needs. In some cases, having a variety of cards might be the optimal strategy to maximise your benefits but do keep in mind that with more credit cards also comes more bills to keep track of and pay when trying to meet the minimum requirements.

Cast Your Financial Spells Wisely,

Value Vaulter