Marksman's Investment Corner is returning soon!

Marksman's Investment Corner is currently on a short break - expect activities to pick up from July 2018 onwards!

Update 01-09-2018: Looks like my break took more time than expected... Things has been pretty busy over the last few months on a personal front, but are slowly settling down and I can look to get a bit more posting done on Marksman's Investment Corner once again. :)

Saturday, September 1, 2018

The Credit Card Rebate Shootout - Part 2 - Big Ticket Items & Large Spendings / Benefits of Installment with OCBC Cashflo over Lump Sum

This is the second part of the credit card rebate shootout series, covering credit card selection that offers rebate and may augment your expenditure management for big ticket items such as furnitures and insurances. Previously Part 1 talks about choice of credit cards intended for regular everyday spendings.

Note - some revision of this article has been done and added in blue.

Credit Card can be a useful expense management tool, provided discipline is exercised in timely payment of the bill. It can even act to reduce effect of inflation on spending to some extent (through the rebates).

Most households would come across major expenses for some big ticket items or large bills such as furnitures, insurances and so on. For this article, I explore the benefits of following cards: OCBC Cashflo, SCU, HSBC Advance and interpret big-ticket spending as $1000 and above in a single transaction. If you feel that there are other credit cards that would be useful for big-ticket spending that should be shared, please let me know and I'll update this article. :)

(Note: There is an inherent bias in the amount of info to OCBC relation/example as being a user of some OCBC products, I'm more familiar with these.)





OCBC Cashflo
  • 0.5% rebate for monthly spending < SGD 1000
  • 1% rebate for monthly spending at SGD 1000 or higher.
  • No minimum spend for rebate
  • Capped to $100 per month - that's a spending of $10,000 for that month
  • Auto-installment feature. When you sign up for the card,you have the option to trigger the monthly repayment to minimum transaction size of either $100, $500 or $1000.
The OCBC Cashflo is able to:
  • Automatically "force" installment payment with 0% installment (over 3 or 6 months) even for things that normally cannot be done so (such as topping up Ez-link, stores that do not have installment plans and stores that would have charged some fees for installment plan over 3 months or 6 months), and still get cashback. (Any admin charges for choosing to charge to credit card at that store is a different story, however.)
  • Smooth out of your cashflow, allowing you to retain more cash in bank, and this extra cash in bank can be combo-ed with high-interest bank accounts like OCBC 360 to take advantage of the higher interest compared to normal savings account (so if you include bank interest, the effective "rebate" may be some ways higher than the 0.5% / 1.0% for the spending.)
OCBC Cashflo can still be used for longer installment period such as 12/24/36 months (at the expense of not getting any rebate) if the store allows such installment scheme.


Standard Chartered Unlimited (SCU)

  • 1.5% cashback for anything
  • No minimum spend for rebate
  • No cap to the rebate
I covered this card under consideration for daily use in Part 1 of the credit card series. The SCU gives 1.5% rebate over anything charged to this credit card. It has no cashback limits nor minimum spend. However, as with most credit cards, making installment payment does not qualify for the rebate.

If Installment Payment or getting rebate for Installment Payment is not in your consideration, the SCU outdo the OCBC Cashflo (then again, that defeats purpose of getting the Cashflo card) at a spend of SGD 6667 for that month.

HSBC Advance

  • Normal holders: 1.5% (No minimum spend) to 2.5% rebate (Above $2000 minimum spend)
    • Capped to $70 rebate - that's a spending of SGD 2800 for that month
  • HSBC Advance Banking customers: 2.5% (No minimum spend) to 3.5% rebate (Above $2000 minimum spend)
    • Capped to $125 rebate - Spending of SGD 3572 for that month.
I had also cover this card under consideration for daily use in Part 1 of the credit card series. Similar to SCU, it gives cashback for any spending charged to this card. However, a minimum spend is required to achieve the higher rebate rate possible.

As a normal card holder, if you are going to charge above $2000 to the card often, but never above $4667, HSBC Advance wins hands-down rebate on large purchases against SCU.

As a HSBC Advance Banking Customer? The SCU only starts to outdo this card with a spending of $8334 for that month.





Lump Sum Payment with other credit cards vs OCBC Cashflo's Installment Payment
Having gone through all that, a thought also came to me: If cashflow management is not your main consideration, is the benefit of the OCBC Cashflo card still able to win over consideration for SCU and HSBC Advance?

After all, the cash is still slowly paid off in installments, so the balance that remains in the bank over the repayment period will also act like additional "rebate", no?

We will assume:
  • The card user uses OCBC 360 (Base 0.05% pa interest rate) with the Salary Bonus, Bill Payment and Credit Card Usage (1.2% pa, 0.3% pa, 0.3% pa respectively) for an effective interest rate of 1.85% pa.
  • No other credit card bills are taken into consideration
We explore 2 scenarios:
  • Payment of a $3000 bill (OCBC Cashflo splits this to 6x 500, and only meet 0.5% rebate)
  • Payment of a $6000 bill (OCBC Cashflo splits this to 6x 1000, meeting 1% rebate)
Bank interest from the cash that has yet to be used to pay off the credit card bill is in red.

Scenario 1: Charging $3000 bill

Credit Card
Mth 1
Mth 2
Mth 3
Mth 4
Mth 5
Mth 6
Effective “Rebate”
OCBC Cashflo
2.50
+ 3.85
2.50
+ 3.08
2.50
+ 2.31
2.50
+ 1.54
2.50
+ 0.77
2.50
26.55
(0.885%)
Standard Chartered Unlimited
45
0
0
0
0
0
45
(1.50%)
HSBC Advance (non-Advancing Banking customer)
70
(Capped at 2800 spent)
0
0
0
0
0

70
(2.33%)
HSBC Advance (Advance Banking customer)
105
0
0
0
0
0

105
(3.50%)
 
Scenario 2: Charging $6000 bill
Credit Card
Mth 1
Mth 2
Mth 3
Mth 4
Mth 5
Mth 6
Effective “Rebate”
OCBC Cashflo
10
+ 7.70
10
+ 6.16
10
+ 4.62
10
+ 3.08
10
+ 1.54
10
83.1
(1.385%)
SCU
90
0
0
0
0
0
90
(1.50%)
HSBC Advance (non-Advance Banking customer)
70
(Capped at 2800 spent)
0
0
0
0
0

70
(1.17%)
HSBC Advance (Advance Banking customer)
125
(Capped at 3572 spent)
0
0
0
0
0

125
(2.08%)


Based on the above, it can be observed the ability to do installment payment comes at the cost of reduced rebate even with the interest earned acting as additional "rebate" unless the interest rate of the bank account is some ways higher than 1.85% pa.

Some calculations tells us the bank account has to be able to earn at least 2.4% pa to earn the same amount of rebate and interest combined when compared to SCU. 

Thanks for reading!

Monday, July 2, 2018

Portfolio Update - 2Q2018 (and some assorted updates)

In the blink of an eye, we have left the first half of 2018 behind and venture into the second half. Volatility and uncertainty litters the market and investors will need to tread carefully - but nevertheless, I believe there are hidden opportunities hidden in the market now which will appeal to the keen-eyed long-term / mid-term investors.



Now, onto the Portfolio update for second quarter of 2018!



Income Portfolio





Counters
Units
Market Price (SGD)
Overall Value based on market price (SGD)
Allocation
1
Cromwell European REIT
1000
0.96
960
4.87%







Growth Portfolio





Counters
Units
Market Price (SGD)
Overall Value based on market price (SGD)
Allocation
2
Alliance Mineral Assets (AMAL)
50000
0.375
18750
95.13%







Cash and other Assets





Counters
Units
Market Price (SGD)
Overall Value based on market price (SGD)
Allocation
3
Warchest
1
0
0
0.00%

Total SGD


19710
100.00%


This quarter sees me top up a small position (+10,000 units) with Alliance Minerals Assets Limited. If everything plays out well, will see a merger with Tawana completed and become a mid-cap producer. Perhaps even a move from Catalist to Mainboard.

Other than that, I am seeing withdrawal of my remainders in the war-chest, heavy cash outflow, usage of credit and then saving up of emergency funds thereafter in preparation to move into my own home, so it is highly unlikely I will make moves, as unfortunate as it is - I have some stocks in my eyes now :(.

In the meantime, in addition to a reduction in my activities on the market, real-life has gotten a lot busier so my activities on Marksman's Investment Corner will continue to be limited. While I expect to update my blog in July beyond this post (I actually have multiple posts in the works), even then I will probably have not more than 2 more posts.

Next portfolio update will be towards end of September 2018.