Credit Card: Points vs Rebates - Which is Better?

(Unfortunately it's another one of my long, math-filled posts. Please bear with me, there's some good points here.)

Most credit cards let you earn points that you can exchange for rewards. Some give you "gifts" when you spend a certain amount (though usually that means spending a lot),

But some offer rebates - letting you get money back on purchases you normally make anyway.

So how do you know which card is most "rewarding"?

Well, in general, it's usually the card that is most aligned with your lifestyle. If you fly a lot, get one that accumulates air miles. If you drive a lot, one that offers gas rebates.

But if you can choose between a card that offers rebates and another that offers rewards, how can you choose which one is the best?

What you can do is figure out the peso value of the points.

For example, BPI lets you earn 1 point for every Php35 spent. And among the different rewards they offer, you can exchange 10,000 points for 1,000 GC or a petron fuel card with 1,000 pesos worth of fuel.

So in this case: Php35 = 1 point; 10 points = 1 peso

You get 1 peso back for every 350 pesos spent - or a 0.28% rebate
(To clarify: that's a little over a fourth of 1% or roughly what a savings account might earn)

Metrobank lets you earn 1 point for every Php20 spent. That looks like a better deal, but let's check the rewards: You can get a 1,000 SM GC for 16,950 points. You get 1 peso back for every 339 pesos spent. (similar to 0.29% rebate)

(My old HSBC card let me earn 1 point for every 200 pesos spent. And I got a USB stick worth ~Php500 for around 16,000 points. This is an obviously worse deal, and I really regret using this card for so long. But anyway, in this case I get 1 peso back for every 6400 pesos spent.)

In contrast, BPI has a Petron fuel card that gives you a 3% rebate. Off hand, that seems like a much better deal than the other cards - assuming you own a car.

(Metrobank also has a similar card - Toyota Mastercard. It gives a 3% fuel rebate and 10% discout at your chosen Toyota dealer.)

But it's limited to a specific product - gas at Petron stations. So it's not a straight up comparison.

Assuming you spend just 400 pesos a week on fuel, and 10,000 every month on everything else (groceries, dept stores, dining, etc). How can you compare?

You can annualize the usual expenses:

Fuel card = 400 a week is Php31,200 a year; and you get Php624 back every year.
"Classic" card = 10,000 a month is Php120,000 a year; and you earn points equivalent to Php336.

So in effect, the rebate is still better, even though only a relatively small part of your budget is spent on fuel.

Of course, credit cards can offer other perks like discounts and freebies at stores. You can also try to figure the value of those, though I tend to disregard them since they vary greatly, aren't "guaranteed" upfront, and there's no clear way to compare with other cards.

(Note: Personally I'd advise against considering 0% installment as a perk; better to save up and pay straight away, as much as possible. But if it's for business or money-making purposes, it is a great perk.)

Credit Card: Points vs Rebates - Which is Better?  Most credit cards let you earn points that you can exchange for rewards. Some even just give you "gifts" when you spend a certain amount (though usually that means spending a lot),  But some offer rebates - letting you get money back on purchases you normally make anyway.  So how do you know which card is most "rewarding"? if you can't control your credit card spending, it's better to go without it entirely.
Of course, these rewards only make sense if you are spending wisely - i.e. what you would otherwise spend if you had no credit card. And if you can't control your credit card spending, it's better to go without it entirely.

Having said that, you can get some things out of your credit card without "scheming" or trying to "outsmart" the credit card company. Just be smart in choosing the right credit card for you.


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6 comments:

  1. been looking for this topic.. will bookmark this page for future reference.. thanks!!!

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  2. tnx sir carlos for this post, naalala ko may rebates pala ako sa isang cards ko na puedeng ma-avail :)

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    Replies
    1. Hi Grace, nice! ayus yan, nakakatulong din ang mga rebates nila.

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  3. Yung nag-iisang credit card ko (Citibank Cebu Pacific card), ang binibigay ay e-voucher na pwede ibili ng plane ticket online. It gives 1 peso for every P100 spent. Not bad at all. :)

    ReplyDelete