ValuePenguin’s analysis of consumer data shows that the average Singaporean consumer is better off sticking to a cashback credit card rather than an air miles card. While miles cards are popular, they typically yield lower rates of rewards (the median of S$240) while also charging high annual fees. The data suggests that the average person can get a higher net return by using a cashback card instead.

According to the government’s survey data on how consumers spend their money, four categories of expenditure comprised most of purchases that could be charged to a credit card:

Expenditure Category S$/Month S$/Year
Food & Beverage 826 10,000
Transportation 778 9,336
Entertainment 372 4,464
Shopping & Others 200 2,400
Total 2,176 26,112

Assuming an average spending of around S$2,000 per month, top cashback cards in Singapore would yield 3% net of annual fees while top miles cards would yield about 2.3% of rewards per S$1 charged on the card. This is because cashback cards in Singapore are particularly generous in the amount of reward they provide, and also charge lower annual fees than miles cards. For example, both top airline cards and cashback cards in the US yield an average of around 1.4%-1.5%.

Of course, averages tell only part of the story. On an individual level, people may find that what’s best for them doesn’t always align with what’s best for the average person. If you’re curious about whether you’re one of the people who’s better off applying for an air miles card, here is a quick guide to how you can evaluate these offers.

Consider the value of the benefits these cards provide for you

Before you do anything else, it’s important to figure out the value of what the benefits the card provides. This starts with understanding the value of their miles–as in how much they’re each worth when redeemed to buy a flight. If you don’t feel like figuring it out on your own, simply search the web for “X miles value” — where “X” is the airline of your choice. Then estimate how many miles you can realistically earn with the card each year and multiply that figure by the mile value. For example, if you can earn 50,000 miles each year, and each mile is worth S$0.01, the card then provides you with $500 in rewards (50,000 x $0.01).

Miles aren’t the only rewards airline cards provide. For example, those who like to purchase travel insurance, which can easily cost S$20 or more, for their trips could save a lot of money by getting a card with a complimentary travel insurance. Some cards also provide complimentary lounge access at airports, which can help you save S$40-S$50 per visit. If you take 2 trips per year and enjoy these benefits for free each time, you could be easily saving S$500 that you would’ve needed to spend to enjoy them otherwise. However, it’s still important to point out that these features would only be valuable for people who actually would have purchased these products and services even without a miles cards.

Think of the opportunity cost

Most people will only ever carry a handful of credit cards, so every new card you acquire should bring you some advantage. In other words, you should always consider whether a new air miles credit card will provide a bigger net benefit than, say, a cash back card you already own. As we demonstrated above, most of the top rebate cards tend to yield more rewards than the top miles cards in Singapore.

To figure out if a miles card actually can be more lucrative for you, you should calculate the annual value a particular airline card has to you as we demonstrated above, and subtract its annual fees from that total. Compare the net result with the cash back you could earn from a card you already have. While this math could turn out differently for each person since everyone has slightly different spending habits, our analysis showed that miles cards tend to be better for two groups of people: those spend more than S$8,000 per year on travel, and those who redeem miles for business class tickets or long-haul tickets only.


How much time are you prepared to invest in redeeming airline miles?

Finally, you should also consider how much time you want to spend redeeming miles earned through credit cards. While your miles can be used like money when redeeming for free flights or hotel nights, you could also risk trading them away for far less than they’re actually worth. If you were offered a pack of gum for $20, chances are you would turn the offer away immediately, recognizing it as a bad deal. Miles are less familiar to most of us, so each transaction will require you to evaluate whether it’s a good deal or not by comparing the actual dollar price of the air ticket to the amount of miles needed for redemption. Not only that, a lot of flights are not easily redeemable with miles during busy travel seasons, so you are going to have to plan ahead of time if you want to book your travel arrangements with miles.

Unless you’re willing to put in the effort required to optimize your use of miles, it could be much easier to go with a cashback card instead. Not paying attention to how you’re redeeming miles can greatly reduce the value you obtained in step one of this guide, and throw off your entire evaluation of a card. However, miles cards also have their distinct advantages to cashback cards. For example, besides the complimentary travel insurance and lounge access we mentioned above, miles cards also tend to provide an unlimited amount of miles rewards no matter how much money you spend, while many cashback cards cap the maximum amount of rebates one can earn in a given month. People who can be proactive about fully utilising benefits offered by their miles cards can still get great value.

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