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Fixed vs Variable Rewards: Which Type Of Credit Card Should You Get?

Not all credit card rewards work the same way.


This article was contributed to us by The MileLion, who wants to help you travel better for less.

This is the most common question people ask me. And the answer, of course, is: “It depends”.

The first and most important question is – what are your objectives?

Are you interested in getting cashback on your spend? Are you keen on turning your spend into flights and holidays? Do you want cards that give you special “lifestyle” privileges, eg access to clubs, private concierge, illuminati initiation ceremonies?

It goes without saying that you should absolutely be using a credit card wherever possible. Every time I see someone pay with cash, NETS or a debit card, I die a little inside, because that’s basically wasted spending. If you’re going to spend money, might as well get something out of it.

Fixed vs Variable Rewards Cards

Rewards credit cards can be broken down into 2 main types:

  • Fixed rewards cards (Cashback)
  • Variable rewards cards (Miles and Points)

Fixed rewards cards, as the name suggests, offers you certainty. If I own a cashback card, I know I will get back x% of my spend in the form of a statement credit. I may get different percentages depending on what category of spending I do (eg groceries may get 3% cashback while fuel gets 5%), but the value of what I get out of the transaction is fixed. $1 is $1.

I’m not a big fan of cashback cards because of the relatively small rebate % as well as the multitude of conditions attached. I spell out more problems with cashback cards here, but to summarise:

  • The cashback you can earn is capped each month
  • You need to spend a minimum amount per month to enjoy the advertised cashback
  • Because of minimum spend requirements, it is difficult to adopt a “best of breed” strategy, i.e. using one card for petrol, one card for groceries, one card for online etc
  • Once you pay an annual fee on a cashback card you’re essentially starting from a net negative position

Variable rewards cards, on the other hand, give you their own currency (eg DBS Points) or an airline’s currency (eg Krisflyer miles). Why I call this “variable” is that the value you get depends on how you spend it. For reasons which I’ll explain in a subsequent post, the value of a mile depends on what you redeem it for. All things equal, a mile applied towards a first class redemption will be worth more than a mile applied towards an economy class redemption.

Of course, since the value you get depends on how you spend your miles, variable rewards cards require a bit more thought and micromanagement than fixed rewards cards. If you’re willing to invest that time, however, the incremental value can be tremendous.

Now, what cards do you need?

Planning To Sign Up For A New Credit Card This January?

From now till 31 January 2019, you’ll receive exclusive cash and vouchers from SingSaver – on top of any perks given by individual banks – when you use our links to sign-up. Some of the cards eligible for the promotion are:

# 1 American Express Singapore Airlines KrisFlyer Credit Card

[SingSaver Exclusive]: $150 Cash for new and existing customers

26,600 bonus miles if you spend $3,000 within the first three months, and another $3,000 between 4th month and 6th month.

# 2 American Express Singapore Airlines KrisFlyer Ascend Credit Card

[SingSaver Exclusive]: $150 Cash for new and existing customers.

49,900 bonus miles if you spend $6,000 within the first three months, and another $6,000 between 4th month and 6th month, and pay the annual fee of $337.05

# 3 Citi PremierMiles Visa Card

[SingSaver Exclusive]: $200 vouchers Cash for new Citi customers. $30 for existing customers.

30,000 bonus miles if you spend $7,500 within the first three months and pay the annual fee of $192.60.

# 4 UOB PRVI Miles Visa Card

[SingSaver Exclusive]: $50 Cash for new and existing customers.

Note: If Air Miles cards are not your cup of tea, you can also take a look at cashback cards.

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