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The beauty of credit cards is that they give us extra values on our ordinary spendings. The money that we would have had anyway spent. Set aside all the common benefits as insurance, payment protection and discounts on merchants time by time, credit cards typically separated into two main categories: Reward Points and Cash Back.
Let's start with "Team Points":
Reward points by definition is that the user would receive a bunch of points after hitting certain amount of spendings. With the points earned, the user could decide how he/she would like to redeem the points. Regular rewards including airline miles, dining vouchers or somehow even cash back.
Hence, "Team Points" having 2 tasks to look into: Earning and Redeeming.
Earning points is not a difficult task. Simply by swiping the credit cards when purchases are made. In Thailand, card issuers normally provide the earning rate of 25 THB per point. Before adding any multipliers into the points war, TMB and UOB Bank are the most generous with their point earning systems.
- TMB Bank offers 10 THB per points for TMB So Fast and TMB Absolute credit cards.
- UOB Bank offers 15 THB per point for UOB PRIVI Miles Card and UOB Preferred Card.
Now, there is a phrase shows up in previous paragraph: Multiplier. Multiplier is definitely a game changer in credit cards game. It accelerates the speed of points earning. Credit card issuers often provide multipliers in specific categories for its specific cards. In order to attract the clients from specific demographic. Take an easy example from Citi Bank (Thailand).
For Citi Rewards, it is clearly designed for users that spend money on a lots of Dining, Travel, Online Shopping. Hence it gives a multiplier of 5x.
Next, for Citi Premier, it targets users that spend more money on shopping (4x on department stores). Of course, VIP reserved parking is reserved at department stores and additional discounts.
Lastly, the Citi Prestige targets users from the "Prestigious" level. Only 2x for every 25 THB spent locally and 3x for foreign currencies. But it comes with perks on travelling: Priority Pass, Complimentary 4th night at participated hotel and limousine transfers.
From the offers, we could clearly see that Citi has the products offered for users from different levels of living and spending. Oh, don't forget that these cards come with annual fee of 4'066 THB, 5'000 THB and 8'453 THB (it is a metal card) accordingly. That's when the tier system is being built silently.
Due to the tier system, some people might apply the cards that do not suit their spending habits, even pay for an unnecessary high annual fee just to get the feeling of being an "Alpha" while flexing that card over the cashier or during check in at hotel reception.
Compared to points earning, redeeming is an art. It consists numerous of researches and comparisons in order to get the most value out of each point we hardly earn.
Reward points redemption normally consists of 3 main categories:
1. Products: From a phone charger to Apple iMac.
2. Cash Valued item: From dining coupon to donation. Even for cash back.
3. Travel: From miles redemption, hotel points and even free hotel stay.
To show a bigger picture, I will show examples from each category from Krungthai Bank. (25 THB per point earned)
Please note that the formula of value of per point is Market Price ÷ Points redeemed
A. Product
This is an easy one, because the price of product is not floating. Considered as fix price throughout the year.
In this example, will be an iPhone 11 Pro Max 256 GB. On Apple store, the selling price is 45,900 THB.
The points required for redemption is 455,160 points.
As points value calculation:
45'900 ÷ 455'160 = 0.1
which the value is 0.1 THB per point
To make the calculation crazier:
455'160 x 25 = 11'379'000 THB
11'379'000 THB is the eligible expense that users need to hit in order to get this iPhone for free.
It is definitely not a quick outcome for most people, but that is a free iPhone that you will get, from the money that you have already been spent.
B. Cash Valued Item
Let's say we maximize the voucher by taking a 140 THB beverage. No hassle as the price is fixed throughout the promotion period.
The points required is 700.
With Easy calculation:
140 ÷ 700 = 0.2
The point value for this coffee is 0.2.
Now, it is the part of points redemption with the most headache.
C. Travel
The redemption rate in Krungsri is 2:1, a very standard redemption rate in the market.
To make the circumstances easier, we will assume that all the flights searched are available for milage redemptions.
For beginner in points and miles game, please note that with points redemption of miles, Credit Card issuers might take 1-3 days to issue to points to frequent flyer account.
Moreover, airlines normally offer redemption booking in certain periods and routes. Hence, it makes "Travel category" much more challenging. Some airline companies excluded fuels and taxes from points redemption too. That means the passengers would still need to pay for some cash despite the flight is booked by miles. If credit card holders would like to use their points for flights, it takes more researches and "luck" in finding a good deal.
But Thai Airways does a great job on this:
"Award tickets issued online include taxes and surcharges at the same amount applied to adults and children aged 2 to 12. For some countries that taxes applied to children are less, the difference may be refunded by contacting a THAI ticketing office after the award travel has been completed."
Let's take an example for flying to Taipei in Business Class on 10th March 2021
Price: 22'700 THB
Miles Required: 30'000
Points needed: 30'000 x 2 = 60'000 points
22'700 ÷ 60'000 = 0.38
So the value per point is 0.38
But points and miles combination is not always the highest value. Let's see another example:
Flying to Kuala Lumpur in Economy Class on 17th September 2020
Price: 5'230 THB
Miles Required: 12'500
Points needed: 12'500 x 2 = 25'000 points
5'230 ÷ 25'000 = 0.21
Which the value is very very close to a cup of coffee.
These are just example from the same bank. Different bank would have different redemption rate and ease of redemption.
For Krungsri, it takes just few taps on phone. But UOB would require at least a phone call to their call centre agent. Click the link to know more about UOB.
For Citi Rewards Credit Card that with lots of multipliers, it takes 5 Rewards Points to redeem 1 mile (5:1 ratio*). It is relatively not "Worth it" for the points we earned.
It is already a headache with these calculations, from the same bank. If holding cards from different banks, different tiers of card, it would probably takes up a full Excel sheet for tracking and calculating.
The satisfying moment is when you did your calculation and got a greater number. That small 0.1 or 0.2 is the value you fully deserve.
Next would be for "Team Cash Back"
This is a very very straightforward sector of credit cards. From the definition, users would receive money value of certain amount after spending. Some categories would be offering more Cash Back and some would be less.
To see a full comparison and introduction of Cash Back Credit cards in Thailand, please check out the link. [Read Here]
Let's take an example from the article mentioned above, the CIti Cash Back Credit Card.
It offers a wide variety Cash Back categories, so it will set up a good example.
Let's compare it back to the Product we introduced earlier, for the iPhone 11 Pro Max 256 GB, selling price of 45,900 THB.
As from the calculation, we found that the card holder would need to spend 11,379,000 THB to get a free iPhone. (455,160 x 25 = 11,379,000 THB)
Let's see how much money would need to spent to get the cash back for the amount of 45,900 THB from Citi Cash Back Credit Card.
From the calculator provided on Citi Bank website, the maximum Annual Cash Back (30,000 THB) with the minimum spent (If all the categories are utilised), is 204,600 THB per month, 2,455,200 THB per year.
To make a quick calculation for amount hitting the target of 45,900 THB in the ideal situation:
Formula: Expense: Cash Back amount
2'455'200 : 30'000 = X : 45'900
30'000 X = 2'455'200 x 45'900
X = (2'455'200 x 45'900) ÷ 30'000
X= 3'756'456 THB
In this case, the Cash Back's "Worth It" value is much higher than Rewards Point.
Take a second example: Travel. The Business Class ticket to Taipei from previous search is 22,700 THB. The potential cost is 60,000 points, equivalent to be 1,500,000 THB
For Cash Back of Citi Cash Back Credit Card:
2'455'200 : 30'000 = X : 22'700
30'000 X = 2'455'200 x 22'700
X = (2'455'200 x 22'700) ÷ 30'000
X= 1'857'768 THB
In this case, the "worth it" value for reward points is higher.
There are "Team Points" and "Team Cash Back" out there. Neither of the team is absolutely better than the other. It all depends on the users' spending habits and preferences.
Please note that transactions incurred from spending on cash advance, mutual fund, unit-linked products, land transfer fee, utility (electricity and water) as well as spending at gas stations, tax refund, annual fee, interest and fees are not eligible for both points earning and cash back in most credit cards.
"Team Points" is definitely requiring more thinking and calculating process, but trust me, the outcome will be worth it. Since the value of points is inflexible, it's floating, please do your best to maximise it.
"Team Cash Back" will be a lot straightforward, just make sure you find the card with the most cash back value on categories you spent the most on. If Skytrain spending, definitely go for Citi Cash Back. If having more spending on Central group (Mall or anything under the group), definitely go for Central Credit Cards.
Of course, you don't have to limit yourself in one category. Credit Card games is defiantly one of the most dynamic game out there, the infinite game. No one will be wining or losing in this war. It is either getting a little more value, or losing a little bit.
As always, remember not to make unnecessary just to get that extra points or cash back. Spend as how you would normally spend, in order to get free stuffs that worth the spendings.
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