Cashback credit cards have proven to be very popular among Malaysians. Next to the reward point system, cash rebates are a great way to save on spending. However, not all cashback cards are created alike; each one has its own cashback rate and is limited to specific spending categories.
To get the most savings from your cash back card, it’s important to choose the right one for your spending habits.
Here are some things to take note of when applying for a cashback credit card.
#1: Rates and categories
Cashback rates and spending categories are interrelated as most cards limit their cashback to specific categories. The most popular categories are petrol, groceries, dining and utility bill payment. There are three mechanisms on which cashback cards operate:
Cashback rates and spending categories are interrelated as most cards limit their cashback to specific categories. The most popular categories are petrol, groceries, dining and utility bill payment. There are three mechanisms on which cashback cards operate:
- High cashback rates (5%-10%) limited to 2-4 categories and lower rates (0.5%-2%) for residuary categories.
- Blanket rate for all categories with a median rate (3-5%).
- User selected categories with fixed rates for each category set by the bank (0.5%-5%).
Depending on your spending habits – choose the card with categories that suit you.
#2: Caps
Most cashback credit cards come with a monthly or annual cap, that is, a maximum amount of cashback that you can receive in a billing cycle. The most competitive products available usually have caps that fall in the range of RM50 – RM100 a month. It’s important to know what your card cashback cap is to ensure you don’t spend more under the false impression that you are earning cashback.
Usually, principal and supplementary cards contribute to the same cashback cap every month but some products calculate the spending separately and allow individual caps for the principal and supplementary cards.
#3: Fees and charges
A cashback credit card, like any other will be subject to the usual fees and charges such as annual fees, cash advance fees, and late payment fees. However, if a cashback credit card allows you to select categories of spending, do note that every time you switch categories, there may be a fee involved. If you add on a category (if the card allows you to do this) you will have to pay a fee on this extra category as well.
Also, it is important to note that not all cashback cards have the same annual fee. Annual fees range from RM70-RM190 for mid-level credit cards and up to RM1000 for premium credit cards.
#4: Special terms and conditions
The terms and conditions of a new credit card commonly goes unread. But if you’re keen on making the most of your card’s cashback feature; it’s vital that you understand the special requirements that qualify you for a cashback card each time you swipe. For instance some cards advertise high cashback rates but are only available during the weekends while others require minimum amount of spend.
Others will only recognise transactions that conducted online or via standing instruction. Some banks are known to have tie-ins with specific merchants and offer bonus cashback if you do business with them.
A cashback credit card can save a few hundred ringgit a year. However, it can also be complicated. The key to finding the right credit card is to first evaluate your spending habits and pay attention to the fine print.
