Credit cards didn’t used to be ubiquitous; it was a status symbol in early days, and only the very well to do could qualify for one.

Singapore’s regulator requires cardholders to have at least S$30,000 income annually, or have at least S$1 million or S$2 million in net financial or personal assets respectively.

These requirements have not risen over the years, while real income levels have. This means that more people can apply for credit cards today than in the past. With a larger pool of people eligible for credit cards and seeing how lucrative credit card business can be, banks have launched an assortment of cards to lure customers to sign up with great offers and attractive rewards.

So, it’s natural that one will be bewildered if signing up for a card for the first time. It’s almost akin to trying to choose what to eat in Singapore at times.

The first question one will ask is:

Which credit card should I get?

Of course, the most immediate consideration would be what you value:

• Are you interested in getting cash rebates?
• Do you want points that allow you to redeem for gifts?
• Do you want to potentially offset your future travel spending  on flights?
• Or, do you value the privileges that the card comes with?

Some other mundane but important consideration to make:

• What is your monthly expenditure?
• What kind of spending do you intend to make on your credit cards: travel-related, general spending, food & dining, shopping? How much of each will you make?

Types of credit cards available

Before we talk about credit cards, let’s talk about the lesser known group of cards: the debit cards. Debit cards, unlike credit cards, draw down from your existing bank balance, so there is no need to pay monthly. Because of the nature of debit cards, banks usually don’t provide any rewards for their use.

Back to credit cards. There are generally two types of credit cards: those that offer a fixed reward (usually in the form of cash back), and those that offer a variable reward in the form of points.

Cashback cards are relatively straightforward: the card offers a fixed percentage rebate for your spending. The percentage may vary depending on the type of spend, but the reward is in cold, hard cash.

Take for instance the UOB Absolute Cashback Amex card: You get $1.70 for every $100 spent on your card. Simple as that.

Some other cash card backs are slightly complicated, such as the Citi Cash Back card:

Just simply look at this very complicated system:

To rub salt to the wound, you only qualify for the ‘bonus’ cashback if you spend at least S$800 a month, and this is why many eschew cashback cards.

In certain situations, select cashback cards are useful but these are very few and specific events, but that’s not the purpose of this article.

The other type of credit cards are those that provide rewards in the form of points, or for some cards, miles. These points can be used to redeem for gifts, vouchers or transfer to hotel or airline frequent flyer points/miles that you can use for award stays or tickets.

Understanding credit card reward points

Most credit card points – with some exceptions – you earn aren’t actually miles that you can use immediately, but instead are in the form of points within the bank’s rewards system.

For instance, DBS awards DBS points, UOB uses UOB$, and Citi issues Citi ThankYou points, and so on. These points can be converted to airline miles (most times for a fee), or even used to redeem for other gifts in the bank’s rewards catalogue, or even use to offset your credit card statement (pro tip: don’t ever do that).

Some specialised credit cards, more commonly known in the industry as co-branded cards, offer direct conversion to the airline miles. In Singapore, this is only available with Singapore Airlines’ Krisflyer programme, which current offers co-branded cards with American Express and UOB. The beauty of these cards are that the miles are usually credited on a monthly basis, without a conversion fee.

If you are reading this, chances are, you want to convert your points for airline miles. This is sometimes not a straightfoward process; different banks have different transfer partners, and some will attract a conversion fee while others don’t.

Below is a quick summary of each bank’s reward currency, transfer fees and transfer ratios.