Miles reward cards are a lot of trouble, but they may be worth it if you don’t mind the math

I HAVE always relied on credit cards that provide cashback on my purchases. But lately, I noticed that cashback cards I’ve relied on have lost their lustre due to the addition of minimum-spend requirements, as well as caps on cashback that can be earned.

Instead, miles cards seem to be where all the fun is at, especially if you can navigate the different miles conversion ratios, expiry dates and category spending.

Since I began working, I’ve relied on a number of different cashback cards.

For instance, I used the Standard Chartered Smart Credit Card as my public transport and coffee card, since it gave a 6 per cent cashback with no minimum spend required on these categories.

However, the card’s terms changed and, now, it only accrues 8 per cent cashback on the same categories if I spend a minimum of S$800 on the card in each statement month.

Assuming that I spend S$200 on public transport and coffee, I would accumulate only about 2.4 per cent effective cashback after spending S$800. If I spend more than the minimum required, the effective cashback would fall even further.

Cashback cards without minimum-spend requirements do exist, such as UOB’s Absolute Cashback Amex card or MariBank’s Mari Credit Card. However, they cap out at 1.7 per cent at best, which is low compared with the potentially juicier returns of miles cards.

For instance, the UOB Lady’s Card, which is also available to men, earns four miles per dollar spent on a cardholder’s chosen category, such as dining or transport.

The Citi Rewards credit card also earns four miles per dollar on most online purchases, including ride-hailing and food-delivery services.

Value of a mile

Before deciding to adopt a miles card, it occurred to me that it was quite difficult to compare the value of a mile.

To give miles a dollar value, I figured that I would take the cost of a flight from Singapore to Hong Kong, and divide it by the number of Singapore Airlines (SIA) Krisflyer miles needed to redeem the ticket.

Assuming one would need about 33,000 Krisflyer miles to book an economy-saver ticket on SIA, and the flight typically costs around S$500 during off-peak seasons, a back-of-the-envelope calculation would suggest that each mile is worth about S$0.015.

That means four miles per dollar could net you about 6 per cent in “cashback”.

While miles cards do not tend to have minimum-spend requirements, they do have a cap on the number of miles you can earn.

Both the UOB Lady’s Card and Citi Rewards credit card are capped at 4,000 miles per month, which means you do not earn any miles above your first S$1,000 spent.

“Uncapped” cards earn unlimited miles, but other conditions apply.

The OCBC 90°N Card, for example, earns unlimited, but fewer, miles per month at 1.3 miles per dollar spent. Points also have to be earned in S$5 blocks, which makes it unsuitable for small purchases.

The Krisflyer UOB credit card earns an unlimited three miles per dollar on selected categories and with conditions – you need to spend a minimum of S$800 a year on SIA Group transactions, such as for Scoot or SIA flights.

Expiry dates and changing terms

Beyond the rewards rates, there are also the expiry dates of the miles earned to take note of.

Miles earned with Citi Rewards points expire five years from the date of card approval, and miles earned from the UOB Lady’s Card expire after two years. The UOB cardholder also incurs a transfer fee when the points earned, called UNI$, are converted into miles.

In addition, cardholders accumulating miles will need to check from time to time if different airlines offer better value for money for air tickets.

If all this has not confused you yet, you should note that all these terms are subject to change.

That means that the bank or airline may decide to change the miles conversion rate, or that either may change at any time its policies on what spending categories are eligible for miles.

This will require cardholders to be extremely alert to the points that they earn each month. If something looks off, they will need to alter their card usage accordingly to maximise their miles earned.

Personally, I think it makes sense to look at miles cards as a form of “surprise reward” and not as something to be tirelessly optimised, unless you’re that “Type A” sort of person.

Currently, I have two miles cards that I use for dining and transport spending, and another that I use for online spending.

It also feels better to spend prudently, knowing that I do not need to hit a minimum-spend amount to earn my rewards for the month.

And when I do decide to travel, it will be a pleasant surprise to have my plane tickets cost less than expected.