We constantly monitor the credit card space in Singapore, and have been collecting data on credit cards and their rewards. For this specific study, we sampled 51 of the most popular credit cards from all of the major card issuers, and compared their current rewards program in 2017 to what they were in 2016. To calculate how much value a card can generate for an average consumer, we created a hypothetical consumer whose spending habit is similar to the Singaporean average according to the government’s expenditure survey. By modeling each card with this hypothetical person, we were able to calculate the value of rewards (i.e. cashback and air miles) that one could earn over 2 and 3 years, while also adjusting for impact of annual fees.
Of note, we’ve excluded some one-off and promotional perks like x% off at a select number of restaurants or shops, etc purposes of comparing direct benefits of each credit cards. As these benefits are constantly changing, and can be often too confusing for consumers to use, we deemed them to be less influential in a credit card user’s economics. We also only considered a card to have changed if its dollar value (in terms of cash rebate and air miles a person can earn over 2-3 years) increased or decreased by at least S$100.
Key Findings: Credit Card Rewards Are Declining
For an average consumer with a monthly expenditure of S$2,000, we found that 2-year dollar value of cards have declined by about S$34 on average. 3-Year dollar values have declined by about S$55 on average. These figures actually under-represent the magnitude of this trend that we’ve noticed. For instance, some banks have introduced welcome bonus promotions that temporarily increase these average figures. When most of these programs expire at the end of February and March, the average decline will increase meaningfully, especially for 3-year or longer time frames where these “one-time” boosts start to matter much less.
|Avg 2-Year Dollar Value||S$1,373||S$1,339||-2.5%|
|Avg 3-Year Dollar Value||S$1,951||S$1,897||-2.8%|
Largely, we’ve been noticing some cards had changed their set of rewards over the last few months, while some have also raised their annual fees. In total, we found that 7 credit cards out of 51 (or 14%) became significantly worse for consumers, while only 1 became meaningfully better. Let’s discuss each factor in detail one by one.
|2016 2-Yr Value||2017 2-Yr Value||Change||2016 3-Yr Value||2017 3-Yr Value||Change|
|UOB One Card||2,322||2,257||(64)||3,393||3,265||(128)|
|OCBC Titanium Card||1,747||1,653||(94)||2,428||2,287||(141)|
|OCBC Robinsons Group Credit Card||2,420||2,227||(193)||3,533||3,340||(193)|
|HSBC Visa Platinum Credit Card||1,604||1,339||(265)||1,991||1,726||(265)|
|HSBC Revolution Credit Card||2,255||1,990||(265)||2,999||2,734||(265)|
|ANZ Platinum Card||1,757||1,356||(401)||2,555||1,870||(685)|
|ANZ Switch Platnium Card||1,917||1,476||(441)||2,875||2,129||(746)|
|POSB Everyday Card||2,892||2,236||(656)||4,224||3,210||(1,014)|
|Maybank Horizon Visa Signature Card||651||815||164||937||1,183||246|
Change in Reward Program
About 8% of the 51 credit cards we sampled in Singapore have reduced their rewards rates by a significant amount compared to 2016. These cards were: OCBC Titanium, ANZ Platinum Visa Card, ANZ Switch Platinum Card and POSB Everyday Card. By either changing the rewards rate or changing reward categories, they ended up providing less in terms of either air miles or cash rebate to the card holder.
|Summary of Change||2016||2017||2-Year Dollar Value 2016||2-Year Dollar Value 2017|
|OCBC Titanium Card||S$1,747||S$1,653|
|ANZ Platinum Card||S$1,757||S$1,356|
|ANZ Switch Platnium Card||S$1,917||S$1,476|
|POSB Everyday Card||S$2,892||S$2,236|
For instance, the POSB Everyday card disadvantaged its users by shifting benefits from a high spending category to a low spending category. Previously, the POSB Everyday card offered up to 9% of cashback for dining expenses, but now decreased this rebate rate to 0.3% while shifting the benefits to overseas spending, which increased from 0.3% to 5%. While this change may seem “fair” on the surface, this is less beneficial to the average consumer who would only travel once or twice a year.
Similarly, OCBC Titanium card completely changed its set of rewards to focus on shopping. By offering 4 miles per S$1 spent on shopping, it seeks to appeal to active shoppers. However, this is also disadvantageous to the average consumer because all other spending only earns 0.4 miles, while it used to earn 1 mile per S$1 before the card’s rebranding. Two ANZ cards mentioned above had a relatively simpler change, as they removed the 2-20x rewards point buff for categories like petrol, travel, entertainment and groceries.
Annual Fee Increase
In terms of annual fees, we observed a total of 3 cards that increased the cost of using them for the consumer. Two cards did this by directly increasing the annual fee amount: UOB Onecard and OCBC Plus! Visa credit card. UOB One card, which returns up to 5% of flat rate cashback on every dollar you spend, used to charge only S$128.4 of annual fee, which was waived for the 1st year. While the waiver still exists, now the annual fee increased to S$192.6, a whopping 50% increase. OCBC Plus! Card increased its fee from S$80 to S$107. One remaining card, OCBC Robinson Card, just got rid of their fee waiver programs, which effectively increases the cost of using this card by S$192.6 over 2 to 3 years. High annual fees offset the benefit of their rewards programs in a meaningful way, and may encourage some consumers to change to a different card.
Besides these, several cards have also increased the minimum requirements for qualifying for annual fee waivers, like OCBC’s Frank and 365 cards. However, their requirements are still relatively lenient as they only require one to spend S$10,000 on the card per year.
Cards That Improved
There was one card that improved in a significant way in Singapore: Maybank Horizon card. Previously named Maybank Horizon Platinum Visa Card, it was rebranded into a much better Maybank Horizon Signature Visa card. This is how it changed. In 2016, Maybank Horizon card used to provide 2 miles for S$1 spent on petrol, travel, shopping and utility related expenses, with 0.4 miles awarded for S$1 spent on everything else. Now, it awards 3.2 miles for S$1 spent on petrol and dining, and another 2 to 3.2 miles for travel related expenses. For all other expenses, it still provides 0.4 miles per S$1. While they raised the annual fee from S$150 to S$180, they still waive this annual fee as long as you spend S$18,000 per year (previously S$12,000 per year), meaning you only have to spend S$1,500 on the card per month. Overall, we think this card improved in dollar value by S$164 over 2 years.
Some other cards also improved, but in a much less significant ways. For instance, DBS is providing S$160 cash rebate for new customers until 31 March 2017, up from S$100 rebate they used to give in 2016. UOB is running a similar program of S$50 rebate for new custoemrs until 31 March 2017. However, these “bonuses” are just up-front incentives that have less impact on the long-term utility of a credit card. Not only that, in the event that banks roll back these incentives, their cards will have no improvement over their offerings from 2016.
From an analyst point of view, this is a classic way of controlling cost. Traditionally, the banking business models has always been about controlling costs & gaining scale because their products are relatively less differentiated than other consumer products like fashion goods. In fact, there has been a trend towards cost reduction for banks in Singapore lately.
According to Straits Times, Citibank just raised the minimum total relationship balance for customers. Servicing an account has a number of cost items associated with it, like customer service, compliance, legal, etc. If a customer’s account is too small, it might not be worth a bank’s time to service it. That’s why they are raising both the account service fee (from S$10 to S$15) and the minimum total relationship balance needed to get the account service fee waiver (page 4 of this document). There was a similar development in the US after Dodd-Frank increased compliance cost for banks, and banks had to raise the minimum balance.
A possible reason for these moves is that banks are either feeling margin pressures or are feeling more secure about their competitive environment. What we do know is that we’ve also been noticing some decline in consumer benefits on credit cards in Singapore in the last few months, i.e. higher annual fees for primary or secondary holders, rising APRs charged on cards, and declining overall benefits in forms of cash back, air miles or welcome bonuses.