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.
- 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.)
Standard Chartered Unlimited (SCU)
- 1.5% cashback for anything
- No minimum spend for rebate
- No cap to 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.
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
- 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)
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!
