Singapore-based financial blog that aims to educate people on personal finance, investments, retirement and their Central Provident Fund (CPF) matters.

Tuesday, 16 July 2019

Who Pays For Your Credit Rewards?

Cashback, air miles, merchant discounts, other perks, these are the incentives that banks and credit card companies (Financial Institutions - FIs) use to attract you to apply and spend on their cards.
Every transaction you spend using these cards, merchants are charged a fee by the FIs for providing the card facility. The fees (known as interchange fee) are what the FIs earn and use to pay for your rewards.

For example, if you swipe your credit card when you buy a new laptop for $1,500 from Courts, FIs would charge Courts 2% of that money (or $30). That $30 would be used to pay for the FIs operation costs and a portion of it will be channelled back to you as rewards (either cash back or some other form). FIs also use the money from the cards' annual fees and interest for late payment to fund the rewards program.

In order to make up for the fees the FIs charge, shops often have to increase the price of their products/services in order to maintain their profit margins (or profits). That means if you are paying via cash or debit card, you are not earning any rewards AND you are paying for a higher price in order to subsidise those people who spend with credit cards.

"If you are using a debit card or cash for purchases, you are literally leaving points and money on the table. It's like throwing away money every time you use cash."

Here's a video that explains in detail how cards are earning money and giving you the rewards

So, use your credit cards wisely.
1) Always pay your monthly credit card bills on time and in full!
2) If you can, always charge any expenses you can find to your credit card
3) Avoid late fee payment and interest charges
4) Ask for an annual fee waiver if possible - although often times the waiver might result in loss of reward points or air miles.

Recommended Post: Spend $40 and Reach Starbucks Gold Membership

How to get more cashback and miles out of your credit cards
How many of you have this problem where you are always wondering which credit card in your wallet will give the best rewards when you are just about to make a payment? With so many different cards available in Singapore, each with their own set of rewards, bonus categories, minimum spending requirements, and more, it can be a huge challenge to know which card will give the best rewards based on how and where we spend our money. 

To help solve this problem, a team of credit card enthusiasts set up a new community-driven project WhatCard that provides a free tool to help everyone find the best credit card to use at every place. 

The website is a simple search engine, so all you have to do is key in the merchant name in the search bar and it will show all the different credit cards ranked in order of rewards given, with additional filters to see cashback or miles rewards cards and also filter by category (e.g. Groceries in the screenshot). The rewards data that the team used was put together from: 
  1. their own transactions, 
  2. transactions from other personal finance communities like Seedly and the HWZ forum
  3. terms and conditions of the various credit cards. 
The team did share that WhatCard is very much still in beta phase so you can expect more merchants (they are currently at 1,100+ merchants), functions and features to be added over time. Because it is a community-based kind of project, the more people using it and contributing to it, the better the service gets. If you find any new offers by your bank or credit card, you can contribute to this project by letting them know the offer, or you could also report any errors or share feedback and suggestions on what to include next to make this tool even more useful for the community.
We think that this is a good project built by the team as a way of supporting and giving back to the personal finance community in Singapore. It is still a beta so it is not perfect, but it is definitely good enough to use regularly and the team have proven to be really responsive in continuing to improve the product.

Check out their website

And if you want to find more promos and deals, check them out at our new page HERE.

Remember to offer your opinions. If you don't put your two cents in, how can you expect to get change?

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