It’s a bright sunny morning and you are walking down the street like you do every day. An acquaintance comes up to you and hands you S$1 just for taking a walk. Every time you take that path, you meet this acquaintance who rewards you with S$1. You earned money for doing something you do every day! Isn’t that great?
Well, this is exactly how cashback credit cards work. They reward you with cash when you charge your expenses to your card. And if you aren’t taking advantage of them, you are literally letting money slip away.
While all of us may own credit cards, some of us aren’t fully ultilising the benefits of our cashback credit card. So, we decided to help out.
Don’t leave money on the table anymore. Learn how to make the most of your cashback credit card to save yourself more money.
1. Pick the right card for your lifestyle
The most important rule when selecting a cashback card is to get the card that rewards as much of your expenses as possible. Different cashback cards offer your cashback or cash rebate on things like dining, online expenses, petrol, entertainment, recurring bills, etc.. Think about what you usually spend on in a month, and choose the card that will help you save the most.
If you don’t drive, don’t get a card that helps you save on petrol. Or if you don’t buy groceries, you won’t need a cashback card that gives you 12% rebate on groceries.
We would even go to the extent of calculating how much we spend, and where the bulk of the expenses are. That’ll help you decide what kind of categories your cashback credit card needs to focus on.
2. Read the terms carefully, and don’t simply look at the maximum cashback
Say you’ve decided that you spend a large proportion of your monthly expenditure on dining, and consequently would like to get the BOC Family Card or Citi Cash Back Card.
Both these cards are excellent cashback cards for dining, but did you realise that the monthly minimum spend required is S$700 and S$888 respectively? It may be too high for you, and you would need to consider a different card. And what’s more, both these credit cards have a cashback cap of S$25-S$30 on dining each month.
To maximise your cashback you need to know how much you need to spend in order to be eligible for cashback, as well as when to stop using that particular card, so that you don’t earn a low cashback rate.
3. Apply for other products from the card issuer
When you’re getting a cashback credit card from a particular bank, you could also consider other products that may help to increase your overall savings. Here are a few examples:
HSBC Advance Credit Card + HSBC Advance bank account
Advance banking customers get 1% more cashback and a higher monthly cashback cap
BOC Family Card + BOC Smart Savers Account
Get up to 1.6% bonus interest with your credit card spend
OCBC 365 + OCBC 360 Account
Get 0.3% bonus interest when you spend at least S$500 with your OCBC credit cards
4. Use your credit card to pay your monthly bills
If you have to meet a minimum spend for your cashback to kick in, then there is no better way to do that than to pay your recurring monthly bills with your credit card. You can use it to pay your telephone bills, your Netflix subscription or any other service that you use regularly.
Just make sure to check that these bills are counted as eligible retail transactions. Read the fine print or call the bank before you decide to set up standing instructions for these payments. You don’t want to be caught in a situation where you think you have met the minimum spend criteria, but your bank thinks otherwise.
5. Make payments in full
Well, this seems like a no-brainer doesn’t it? But any unpaid amount is the kryptonite to a cashback card. Why? Well, let’s say that you have a card that offers you a flat 1% cashback. You spent S$500 and earned S$5 as cashback. You decide to pay the minimum amount of S$100 and carry the balance forward. The interest rate on your card is 25% p.a. So for S$5 cashback, you end up paying S$8.33 as interest.
So now, rather than maximising your cashback, you are essentially financing your credit card’s rewards programme on your own.
6. Don’t pay the annual fee for a cashback card
If your bank no longer wants to waive your annual fees, it’s not wise to continue holding on to the cashback card. The reason is very simple, the main motivation to use a cashback card is to save money. If you have to pay your annual fee, you’re essentially starting the year in deficit, and it’ll eat into any potential savings you may have. Always request for a waiver, and if all else fails, cancel the card and use a different card.
7. Have a combination of cashback credit cards
Despite everything that is being said to promote a credit card, no single credit card will be a perfect match for your daily expenses WHILE giving a high cashback. There are cashback cards that cover some categories and reward you with a high cashback, and there are those that promise a flat (but low) cashback rate on all purchases, together with no minimum spends or cashback cap.
To truly maximise your cashback earned each month, you should have a combination of at least two cards. The first will be used on specific types of spends like dining, online spends or groceries. The second will be used for everything else that ‘falls through the cracks’, such as insurance premiums, vet bills for your pet, or your haircuts.
8. Be mindful when using your cashback credit card for big-ticket items
Almost all cashback credit cards that offer high rates of cashback come with a cap on the amount you can earn each month. This is precisely why using it for big-ticket purchases is a bad idea. Let’s say that you want to buy a MacBook Pro that’s going to set you back S$2,588. You decide to buy it online and use your DBS Live Fresh Card since it gives you 5% cashback on online spending.
Instead of earning S$129.40 as cashback, you only receive S$20. This is because the cashback on monthly spends is capped at S$20 for online spends. You would be better off using a rewards card or an air miles card for such purchases.
9. Take advantage of sign-up offers
There was a time when banks offered additional cashback just for signing up for a credit card with them. These days, such attractive offers are less common. You will typically be required to make a few transactions or spend a certain amount in the initial months in order to receive additional cashback.
Hence when you sign up for any credit card, make sure that you are aware of the sign-up terms, and plan your expenses to take advantage of these offers.