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    How to Maximize Credit Card Cashback Rewards?

    Credit cards open a new world of opportunities for the cardholder right from providing a safety net of being able to purchase products or services without the need for cash to being rewarded for every expense. The rewards offered by credit cards range from reward points to frequent flyer miles, to the popular reward of cashback. Cashback credit cards have become some of the most sought after credit cards and rightly so. Unlike other rewards, cashback puts money back in the hands of the cardholder. Cardholders receive a small portion of the expense charged to their cards back into their accounts and this cashback received can be used to offset monthly expenses making purchases cheaper and increasing the savings a cardholder can earn.

    Cashback credit cards, like all other credit cards need to be used correctly to maximise its potential. Inefficient use or mismanagement of the card can be detrimental and lead to not just poor levels of cashback but debt as well. The guidelines to maximize the cashback from a credit card are as follows.

    Pay for Credit Card Offers

    This goes without saying but cardholders should always be aware of the fact that nothing offered by a credit card comes free of charge. The cashback provided by credit cards is no different. They often come with terms and conditions that are not advertised as boldly as the benefits but can make or break the utility of the card. Cashback credit cards require the cardholder to fulfil certain stipulations before it can provide the advertised cashback. Certain credit cards such as the ANZ Optimum World MasterCard offer a higher 5% cashback on a chosen category of spending but not on all expenses. Every other expense that falls outside the chosen category can earn only 1% cashback. So if the category chosen is travel and the cardholder charges an expensive dinner to the card, it wouldn’t be able to offer the cardholder its maximum cashback capacity. Cardholders also have to choose their category before a certain cut-off date and failure to do so would result in the card earning a blanket 1% cashback on all categories of expenses charged to the card. Certain credit cards also have spending requirements. This means that the cardholder needs to meet a minimum spend amount to avail the cashback. The UOB One card is a good example of a cashback card with a minimum spend requirement. Anything under S$300 charged to this card wouldn’t provide any form of cashback.

    Cashback Limits:

    This is something the cardholder has to look out for. A credit card may advertise its cashback rates but don’t show the same zeal when it comes to mentioning its cashback limit. There is some form of cap put on the cashback a card can offer. Taking the UOB One card as an example, the cashback is capped to S$600 a year. This means that after a certain point, regardless of how much a cardholder charges, the card stops giving cashback. The trick is to stay within this maximum rebate threshold. Cardholders should calculate how much they can charge to their card before they hit the cap on cashback and spread out their purchases accordingly. Simple reminders such as a small sticker or label attached to the front of their card can serve as a cue to not just remind them of how much they can charge, but also serve as a warning sign for overspending. Certain credit cards like the ANZ Optimum World MasterCard have taken advantage of the limitation in the competitors and provide cardholders with no caps on the cashback it can provide but come with its own requirements that can be just as hassling.

    Introductory Rates:

    Certain credit cards are advertised with hard to believe benefits such as S$100 cashback upon approval or free gifts or special rates of interest. While these offers serve to entice prospective cardholders, the fact is that they are short lived. Cardholders may opt for a certain card believing that the interest rates are as low as advertised only to realise that they have rolled back to their existing rates after a few months. Most joining bonuses are short lived promotions with a lifespan of a few months and cardholders need to keep an eye out for such introductory rates before they start charging expenses to the card.

    Match the Credit Card to the lifestyle:

    This is important especially when one opts for a cashback card. Cardholders need to pick a card that provides them with cashback for an expense they often incur. Credit cards such as the ANZ Optimum World MasterCard provide higher rates of cashback on a chosen category and a blanket 1% cashback on the other categories. Categories include travel, shopping, dining and groceries. So if they choose a category such as shopping where they tend to spend the most money, the card will prove beneficial and offer a higher rate of 5% cashback. The same card won’t be able to provide a high rate of cashback when an expense outside the chosen category is charged to the card. If cardholders have specific expenses, then a credit card such as ANZ Optimum World MasterCard can be used. If their expenses are more generic or sporadic then a general purpose cashback card such as the Citi Cash Back card will serve them better.

    Paying off the balance in full:

    Probably the most important guideline of them all, regardless of spend criteria, cashback caps or nature of expenses. The cardholder must ensure that they pay off their monthly balances in full if they wish to maximise their cashback. The cardholder can enjoy the cashback only when there is no added burden of interest rates on the monthly balance. Making minimum payments on such cards render its benefit useless as the interest can eat away far more than what the card can offer through cashback.

    Cashback credit cards allow cardholders to boost their savings when used correctly. Following the guidelines and making full payments can go a long way in ensuring the card lives up to its potential.

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