Shopping experts always look for ways to maximise rewards from credit card spendings. As the festive season is approaching, credit card issuers have introduced a variety of spending cash rebate schemes to coincide with consumers' heightened desire to spend. However, the Consumer Council’s market survey revealed vastly different details amongst various spending cash rebate schemes, such as the “eligible spending”, redemption rate, minimum spend requirements, maximum rebate limit, etc., whereas the cash rebate rate could vary by over 26 times. Although redemption rates of the time-limited cash rebate schemes are generally better value for money than regular schemes, consumers should bear in mind that time-limited schemes usually come with more conditions, for example, most would set an upper limit for cash rebate, as well as minimum spend requirements for single or accumulated transactions. Therefore, even for the same credit card, the cash rebate amount received by different consumers could vary in accordance with their different consumption modes and habits. As small sums could accumulate to a large amount over time, the Council recommends consumers to select a credit card spending scheme that is suitable for their personal spending preferences and habits, while at the same time manage their finances wisely and avoid overspending in blind pursuit of spending rewards, which could result in huge credit card debts.
Between October and November this year, the Council sought information from 20 card issuers about their credit card spending cash rebate schemes and reviewed the relevant website of 1 bank. The purpose was to survey the standard spending cash rebate schemes of personal credit cards operated by the card issuers, as well as time-limited spending cash rebate schemes valid between August and October with a promotional period of 1 month or more, so as to understand the rewards calculation formula and relevant terms and restrictions.
Differences in Forms of Rebate and Definition of “Eligible Spending”
The forms of cashback varied amongst the different standard cash rebate schemes, mainly falling into 3 categories: direct rebate, rebate through redemption, and reward deduction. Each card issuer would calculate the cash rebate amount to be received by the cardholder by multiplying its set “eligible spending” by a certain percentage or designated redemption rate. Alternatively, the “reward” is calculated based on the cardholder’s “eligible spending”, which would then be used for redeeming a cash rebate through the reward scheme, or the reward is deducted from the transaction amount when the cardholder shops at designated traders or their online platforms. Amongst the 21 card issuers in the survey, the highest rebate rate could be as high as 6%, more than 26-fold difference as compared with the scheme with the lowest rebate rate of 0.22%, whereas the general rebate rate ranged from 0.4% to 0.5%. The forms of rebate included depositing the cash rebate directly into the cardholder’s credit card account; automatic deduction from the current or following month’s statement balance; or directly depositing the cash rebate into the cardholder’s savings account under the same issuer. These forms of rebate save the hassle of redemption application, while the cardholder also does not need to worry about the expiry of their rewards. On the other hand, some schemes require the cardholder to redeem the cash rebate, other gifts, merchant gift vouchers or services, etc., through the reward scheme after accumulating a certain reward quantity. For this type of reward schemes, cardholders need to be mindful of the reward points’ validity period and redeem before the points expire.
Consumers should note that not all transactions are qualified for the “eligible spending” requirements. Out of the 20 card issuers that responded, most defined cash advance, credit card annual fees or financial charges, purchase of casino tokens, and tax payments as non-eligible spending. Furthermore, only 8 issuers (around 40%) would issue rewards or cash rebates for transactions involving specified insurance premiums or subscription of designated funds.
Over 11-time Difference in Spending Redemption Rate Under the Same Category
To cater for different consumption modes of consumers, many credit cards offer different rewards percentage or rebate rates for designated spending categories. According to the Council’s calculation of the average transaction amount required for redeeming $1 cash rebate across different schemes, the redemption rate was found to vary considerably even for the same spending category. For the average transaction amount to redeem $1 cash rebate in the dining/restaurant category, it ranged from the lowest of $33.33 to the highest of $225 amongst the standard schemes, a difference of almost 6 times; while that for the time-limited schemes ranged from $8.33 to $100, an 11-time difference. With regard to online transactions under standard schemes, the average transaction amount for redeeming $1 cash rebate ranged from the lowest of $31.25 to the highest of $250. Consumers should note that at least 3 card issuers stated that only online transactions settled in foreign currency would be qualified as “eligible spending”. Some card issuers would offer a higher reward percentage for overseas spending, which was 1 to 2 times higher than that for regular local transactions, or even more. Taking the credit card of 1 card issuer as an example, the average local spending amount required for redeeming $1 cash rebate was $250, while average overseas spending was $83.33 only. The Council reminds consumers that despite the seemingly more favourable cash rebate rate for overseas spending, foreign currency transactions often involve handling charges and foreign exchange rates. Therefore, consumers planning to use their credit card overseas should first enquire about the details with the relevant card issuers, so as to avoid the expensive handling charges in return for extra rewards, which may do more harm than good.
Better Rates but More Restrictions for Time-limited Schemes
Some time-limited reward schemes may appear more favourable than standard schemes with a view to urging consumers to spend more within a designated period of time. However, consumers should note that time-limited schemes generally come with more conditions, such as cash rebate limit, higher minimum spending per transaction, or higher monthly eligible spending requirement than standard schemes, etc., whereas the cash rebate usually requires a longer processing time before it is deposited into the cardholder’s account. As such, consumers should carefully consider the various conditions and restrictions before spending with credit cards and avoid rushing into high-value transactions due to the perks of the time-limited schemes, thereby leading to unnecessary spending or over-consumption. For example, the credit card of one of the card issuers did not set an upper limit for the basic rewards from any eligible spending under the standard scheme. This same credit card offered a time-limited scheme which would reward 9 times more bonus points when using mobile payment, yet there was a monthly limit of 10,000 for the bonus points, meaning that only the first $1,100 worth of spending via mobile payment would be rewarded with bonus points. This is equivalent to only $40 bonus cash rebate per month, while the subsequent spending would only be qualified for the basic reward. As such, the consumer could eventually only earn $40 worth of bonus points more than standard scheme, regardless of how much they spend.
Even when all redemption conditions are met, the disbursement time of the rewards/cash rebate also varied between the standard and time-limited schemes. Most of the standard schemes would deposit the rewards/cash rebate into the cardholder’s account within a few days to a month, whereas time-limited schemes require a longer disbursement time after completing the transactions, with some schemes even requiring 3 to 5 months for disbursement into the cardholder’s account.
Even with the same credit card spending during the same period under the same scheme, consumers with different spending modes might not earn a higher cash rebate amount with time-limited schemes than standard schemes. For example, if the spending amount per transaction is lower, it might not meet the accumulated spending requirements for time-limited schemes. However, consumers with a higher spending might not receive a more substantial reward or cash rebate either. In the scenario where 2 consumers have respective spending amounts of $5,000.4 and $15,000 (a difference of almost 2 times), the cash rebate earned by the higher-spending consumer would only be 1.6 times more than that of the other consumer due to the monthly rebate limit of the time-limited scheme. Hence, when consumers are selecting credit cards and spending reward schemes, apart from noting the rebate rate claimed by the card issuers, they should also consider various other factors, such as whether their personal consumption mode is suitable for the requirements of the spending reward scheme including the reward or cash rebate calculation method, spending amount, as well as the cash rebate limit, etc.
Pay Heed to the Designated Trader List and Other Conditions
A number of card issuers would collaborate with designated traders to offer spending reward offers, yet the list of designated traders might be updated from time to time without notifying cardholders. Consumers are recommended to regularly take note of the information announced by the card issuers so as to avoid the disappointment of spending at designated traders that had been removed from the list and not being able to receive any rewards. Consumers should also regularly check the validity period of the rewards to prevent expiry. If the consumer chooses to deduct the reward from the transaction amount by means of a mobile app or online platform notification after the transactions, they should note whether the card issuers have set an effective period for this option. In case the notification is not submitted within the designated period, the reward cannot be deducted from the transaction amount.
Notwithstanding the convenient shopping experience offered by credit cards as well as the various enticing spending reward schemes, the Council reminds consumers to manage their finances prudently and refrain from applying for too many credit cards or overspending simply because of the attractive spending rewards. When selecting a credit card or spending reward scheme, apart from considering the spending rewards or cash rebate, consumers should also consider their personal consumption mode, the key terms of the credit card contract, conditions and restrictions for spending rewards, as well as assessing their own financial situation and ability to repay, so as to be a prudent consumer.
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