Cashback vs miles credit card? Which is the better choice? Recently, my colleagues at work were talking about it, and one of them had just recently redeemed return flights to Japan using purely miles that they have accumulated from their credit card. That got me curious whether credit cards that reward you with miles on your purchases were indeed as good as it sounded. I have always preferred credit cards that offered cashback all these while.
So I got down to investigating to compare which was more value for money – cashback vs miles credit card? In this article, I attempt to win the winner with facts and figures.
Types of Credit Cards
First of all, when it comes to determining which credit cards are best for you, it all boils down to your spending habits and personal preferences. Here’s a summary of the three (3) main types of credit cards that are offered by banks:
| Type of Credit Card | Pros | Cons |
|---|---|---|
| Cashback | A percentage of your purchase is given back to you as cashback. | There’s usually a monthly cap on the cashback per month, and there might be some spending requirements for you to fully maximise the cashback rewards. |
| Miles | You earn miles on your purchases. Miles are like points, just that you use it to redeem flights or part of it instead. | It takes a long time to accumulate enough miles to claim a flight, and your miles might expire too! |
| Rewards | You earn points on your purchases. You can redeem a variety of items with points depending on the reward catalogue. | It takes a long time to accumulate enough points to get great rewards, and your points might expire too! |
Check out: 5 Things to Consider when Choosing a Credit Card [Malaysian Edition]
Cashback vs Miles credit card
Note: I’ll be using HSBC Singapore credit cards for the purpose of this experiment.
Let’s take HSBC’s Revolution Credit Card and Advance Credit Card for the purpose of this experiment. HSBC doesn’t have a dedicated Air Miles credit card, but it is arguably one of the fastest way to earn miles.
| Features | HSBC Advance Credit Card (Cashback) | HSBC Revolution Credit Card (Reward Points to Miles) |
|---|---|---|
| Perks | ✓ Get up to 2.5% base cashback on local and overseas purchases – 1.5% with no minimum spend – 2.5% when you spend above SGD2,000 Note: Capped at SGD70 per calendar month ✓ 1-year annual credit card fee waiver ✓ Earn additional 1% HSBC Everyday+ Cashback with your HSBC Everyday Global Account – Deposit fresh funds of minimum SGD2,000 (or SGD5,000 for HSBC Jade and Premier customers) into your HSBC Everyday Global Account each calendar month. – Perform a minimum of 5 Eligible Transactions each calendar month. Note: Capped at SGD300 (or SGD500 for HSBC Jade and Premier customers) | ✓ 10X Reward Points with online and contactless payments Note: Capped to 9,000 Bonus Points per calendar month. ✓ 1X Reward Point for all other types of spending ✓ No annual fee ✓ 1% HSBC Everyday+ Cashback with your HSBC Everyday Global Account – Deposit fresh funds of minimum SGD2,000 (or SGD5,000 for HSBC Jade and Premier customers) into your HSBC Everyday Global Account each calendar month. – Perform a minimum of 5 Eligible Transactions each calendar month. Note: Capped at SGD300 (or SGD500 for HSBC Jade and Premier customers) |
| Reference | HSBC Advance Credit Card website | HSBC Revolution Credit Card website |
Do note that not all purchases are created equal. Only eligible purchases are eligible for cashback or earning miles.
| “Eligible Purchases” means posted retail purchases (in the case of HSBC Spend Instalment, only the total purchase amount will qualify as an Eligible Purchase in the month of purchase), and shall exclude the following transactions (which shall, where applicable, be determined based on the transaction descriptions reflected in HSBC’s system and the merchant category codes from Visa / Mastercard): – Foreign exchange transactions (including but not limited to Forex.com); – Donations and payments to charitable, social organisations and religious organisations; – Quasi-cash transactions (including but not limited to transactions relating to money orders, traveler’s checks, gaming related transactions, lottery tickets and gambling); – Payments made to financial institutions, securities brokerages or dealers (including but not limited to the trading of securities, investments or crypto-currencies of any kind); – Payments on money payments/ transfers (including but not limited to Paypal, SKR skrill.com, CardUp, SmoovPay, iPayMy); – Payments to any professional services provider (including but not limited to GOOGLE Ads, Facebook Ads, Amazon Web Services, MEDIA TRAFFIC AGENCY INC); – Top-ups, money transfers or purchase of credits of prepaid cards, stored-value cards or e-wallets (including but not limited to EZ-Link, Transitlink, NETS Flashpay and Youtrip); – Payments in connection with any government institutions and/or services (including but not limited to court costs, fines, bail and bond payment); – Any AXS and ATM transactions; – Tax payments (including HSBC Tax Payment Facility); – Payments for cleaning, maintenance and janitorial services (including property management fees); – Payments to insurance companies (including but not limited to sales, underwriting, premiums and insurance services); – Payments to educational institutions; – Payments on utilities; – The monthly instalment amounts under the HSBC Spend Instalment; – Balance transfers, fund transfers, cash advances, finance charges, late charges, HSBC’s Cash Instalment Plan, any fees charged by HSBC; – Any unposted, cancelled, disputed and refunded transactions; and such other categories of transactions which HSBC may exclude from time to time. Source: Terms and Conditions Governing HSBC Advance Credit Card Cashback Programme |
How much Air Miles can you get from the Rewards Points?
According to HSBC Rewards Redemption Catalogue for Travel Category, it’s 25,000 points for 10,000 Air Miles (i.e. KrisFlyer miles or Asia Miles). That’s 2.5 points per mile.
For how much the miles are actually worth in dollars and cents – on average, KrisFlyer miles are worth about 1.1 cents per mile while Asia Miles are worth about 1.2 cents per mile.
On top of that, some banks charge you an extra fee to convert the reward points into miles. For example, for HSBC, you’d need to be enrolled in HSBC’s Mileage Programme (9,000 points or SGD40) to be able to redeem your points into miles annually.
Comparison between Cashback and Miles
Scenario 1: Spend SGD1,000 of eligible purchases a month & SGD2,000 fresh funds into HSBC Everyday Global Account
Let’s say if you spend SGD1,000 a month on eligible purchases and deposit SGD2,000 fresh funds into your HSBC Everyday Global Account, the value you’d get from the miles credit card is a whooping SGD1,030 (SGD300 vs SGD1,330) more per annum than the cashback credit card.
| Cashback | Miles | |
|---|---|---|
| Calculations | Base Cashback SGD1,000 * 1.5% = SGD15 HSBC Everyday+ Cashback SGD1,000 * 1.0% = SGD10 | Base Reward Point SGD1,000 * 1X = 1,000RP Bonus Reward Point SGD1,000 * 9X = 9,000RP HSBC Everyday+ Cashback SGD1,000 * 1% = SGD10 |
| Value per month | SGD25 | 10,000RP (SGD110 @ 1.1 miles / RP worth of KrisFlyer miles) & SGD10 Total Value: SGD120 |
| Value per year | SGD25 * 12 = SGD300 Total Value: SGD300 | 10,000RP * 12 – 9,000RP (HSBC Mileage Programme) = 110,000RP (SGD1,210 @ 1.1 miles / RP worth of KrisFlyer miles) & SGD120 Total Value: SGD1,330 |
| Net % savings per year | SGD300 / (SGD1,000 * 12) = 2.5% | SGD1,330 / (SGD1,000 * 12) = 11.08% |
Scenario 2: Spend SGD2,000 of eligible purchases a month & SGD2,000 fresh funds into HSBC Everyday Global Account
For this scenario, let’s double the spending amount to SGD2,000 a month on eligible purchases and still deposit SGD2,000 fresh funds into your HSBC Everyday Global Account. The value you’d get from the miles credit card is still SGD753 (SGD840 vs SGD1,593) more per annum as compared to the cashback credit card.
| Cashback | Miles | |
|---|---|---|
| Calculations | Base Cashback SGD2,000 * 2.5% = SGD50 HSBC Everyday+ Cashback SGD2,000 * 1.0% = SGD20 | Base Reward Point SGD2,000 * 1X = 2,000RP Bonus Reward Point SGD1,000 * 9X = 9,000RP HSBC Everyday+ Cashback SGD2,000 * 1% = SGD20 |
| Value per month | SGD70 | 11,000RP (SGD121 @ 1.1 miles / RP worth of KrisFlyer miles) & SGD20 Total Value: SGD141 |
| Value per year | SGD70 * 12 = SGD840 Total Value: SGD840 | 11,000RP * 12 – 9,000RP (HSBC Mileage Programme) = 123,000RP (SGD1,353 @ 1.1 miles / RP worth of KrisFlyer miles) & SGD240 Total Value: SGD1,593 |
| Net % savings per year | SGD840 / (SGD2,000 * 12) = 3.5% | SGD1,593 / (SGD2,000 * 12) = 6.64% |
Scenario 3: Spend SGD2,800 of eligible purchases a month & SGD2,000 fresh funds into HSBC Everyday Global Account
For the final scenario, let’s max the base cashback benefit with spending of SGD2,800 on eligible purchases, and deposit SGD2,000 fresh funds into your HSBC Everyday Global Account. The value you’d get from the miles credit card is still SGD618.60 (SGD1,080 vs SGD1,698.60) more per annum than the cashback credit card.
| Cashback | Miles | |
|---|---|---|
| Calculations | Base Cashback SGD2,800 * 2.5% = SGD70 HSBC Everyday+ Cashback SGD2,000 * 1.0% = SGD20 | Base Reward Point SGD2,800 * 1X = 2,800RP Bonus Reward Point SGD1,000 * 9X = 9,000RP HSBC Everyday+ Cashback SGD2,000 * 1% = SGD20 |
| Value per month | SGD90 | 11,800RP (SGD129.80 @ 1.1 miles / RP worth of KrisFlyer miles) & SGD20 Total Value: SGD149.80 |
| Value per year | SGD90 * 12 = SGD1,080 Total Value: SGD1,080 | 11,800RP * 12 – 9,000RP (HSBC Mileage Programme) = 132,600RP (SGD1,458.60 @ 1.1 miles / RP worth of KrisFlyer miles) & SGD240 Total Value: SGD1,698.60 |
| Net % savings per year | SGD1,080 / (SGD2,800 * 12) = 3.21% | SGD1,698.60 / (SGD2,800 * 12) = 5.06% |
Summary of Scenarios Result
Scenario 1 – Spend SGD1,000 on eligible purchases
Scenario 2 – Spend SGD2,000 on eligible purchases
Scenario 3 – Spend SGD2,800 on eligible purchases
Note: All scenarios have a deposit of SGD2,000 of fresh funds into HSBC Everyday Global Account
| Scenario | Value per month | Value per year | Net % savings per year |
|---|---|---|---|
| 1 – Cashback | SGD25 | SGD300 | 2.50% |
| 1 – Miles | SGD120 | SGD1,330 | 11.08% |
| 2 – Cashback | SGD70 | SGD840 | 3.50% |
| 2 – Miles | SGD141 | SGD1,593 | 6.64% |
| 3 – Cashback | SGD190 | SGD1,080 | 3.21% |
| 3 – Miles | SGD149.80 | SGD1,698.60 | 5.06% |
Verdict – Miles credit card for the win, if…
It has been a fun experiment. The result of the cashback vs miles credit card showdown is – the miles credit card! Based on the figures, it is the clear winner in terms of value, if you travel a lot. Otherwise, the miles points are pretty useless.
Questions? Feel free to drop them in the comment section.
Check out: Spend Smarter
