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What is a cashback credit card?

Applying for and using a cashback credit card is not as easy as it sounds. 2

By Ooi Chia Shen on January 12, 2018 | Reading time: 6 minutes

cash-back-credit-cards

Cashback credit cards gives you a percentage back for every Ringgit that you spend into cash rebates. The cash rebate that you will get back depends on the cashback rate offered by the particular credit card. Cashback is an incentive offered by banks for their credit cards in order to get cardholders to spend more using the card. Cardholders will then be refunded a percentage of the amount they spend into their credit card’s account.

How does cashback work?

Each cashback credit card will have an accompanying percent rate (e.g. 5% cashback on groceries). This is the amount you earn back whenever you charge something to your card for a certain spend on that category.

For example, the OCBC 365 MasterCard offers 1% cashback for the first RM1,000 spend every month. Then, 0.5% cashback rate for subsequent amounts above RM1,000 spend with the card.

This means you receive RM10 cashback for the first RM1,000 and 0.5% of whatever you else you spend on with the card. Therefore, you may think of a cashback credit card as a permanent discount on your spending.

If your credit card offers you a cashback of 5% and your monthly spend was RM100, you would receive RM5 in cashback and your purchases would amount to only RM95. The cashback is usually paid to your account at the end of your credit card statement cycle.

What to consider when applying for cashback credit card?

In order to get the most out of using a cashback credit card, here are some pointers you should take note to help you select the right card for your spending. Understanding how a cashback credit card works, and the features along with the common terms will help enjoy the most saving with a cashback credit card. Get a better understanding on cashback credit cards by reading below:

Cashback categories

Most cashback credit cards give rebates on specific spend categories, such as petrol, dining, or groceries. If a significant portion of your budget goes to a particular spend type, you can save a lot of money when you use a cashback credit card to pay for these purchases. Instead of paying for these in cash, use your cashback credit card instead and get a portion of your money back. Risk: they seduce you with a high cashback rate, but on closer inspection you find out it is for a category that you do not spend a lot it.

 

cashback-guide-01

Cashback tier

Some credit cards will offer cashback in several tiers according to your spending patterns.  For example, the HSBC Amanah MPower Platinum Credit Card-i. While it offers a significant cashback of 8% for both petrol and groceries for total expenditure exceeding RM2,000 per month, you are only entitled to 2% cashback for the same categories if your total spending is below RM2,000. Pay attention to these details and take advantage of the maximum cashback tier by focusing the targeted spending on your cashback card. You’ll be able to make more savings by simply making use of your credit card’s cashback tie.

Cashback tiers can work in two ways. Some cards will give you high cashback percentage on your first spend, and reduce it if you spend more. An example is the OCBC World Mastercard, which gives you 1.2% for the first RM1,000 spend, then it falls to 0.6%. Other cards increase the cashback after you reach a minimum level of spend. The Alliance Bank You:Nique Card Rebates combines both methods. You receive 0.5% cashback for your first RM1,000, 1.5% for the next RM1,000, 3% for the RM1,000 after that. Then, you receive 0.3% for spending above RM3,000.

Spending type

When deciding on which cashback credit card to get, you should first take into account what you usually spend the most money on. Aside from that, taking into account of your spending pattern will also help you to make the most of a cashback credit card.

It would also help to determine the type of spending you intend to use the credit card for as this will make it easier for you to choose a card suitable for your spending, and get the most out of the cashback credit card.

Minimum monthly spend

Some cashback credit cards will only give you cashback if you hit a certain level of minimum monthly spending. Therefore, if you are not a big spender, and hold a credit card for emergency use only, this may mean you don’t receive any cashback. While some cards have minimum spend based on categories, such as the Standard Chartered JustOne Gold Card.  The card requires a minimum monthly spend of RM500, out of which RM300 must be on petrol in order to earn the 4% cashback on petrol.

If you are looking to get cashback on groceries and petrol, when estimating how much you spend in total, also take into account how much you will spend on groceries and petrol. Then, assess if your monthly spending on those categories will be enough to hit the minimum spend requirement to receive cashback.

 

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Maximum cap

Most banks set a maximum cap for some of their cashback categories. For instance, the card may have an RM50 cap and offers you a 10% cashback. This means you need to spend RM500 to enjoy that offer, spend any more than that and you won’t receive any more cashback since the cap is at RM50. So don’t be fooled into thinking the more you spend, the more cashback you receive.

For example, the Citibank Cash Back Credit Card offers a cashback of 5% on petrol spending of any amount. However, the cashback is capped at RM15 per month. While the HSBC Amanah MPower Platinum Credit Card-i offers 8% cashback capped at RM50 on a monthly basis if your total card spending exceeds RM2,000 per month. While there is a bigger gap on the cashback amount allocated between the two cards, what matters most is how much you actually spend on petrol each month.

To determine the best cashback credit card for you, you’ll need to analyze your average monthly expenditure based on your income. Then, identify the factors that influence your spending by breaking it down into categories. Be aware of the cashback cap and calculate how much you must spend each month to reach the cap. Then, consider if this is an amount you would typically spend in a month to help you decide if you can make the most of the cashback credit card.

Be mindful of exclusions

Some cashback is tied to spend with specific partnering merchants, for example, the Citibank Cashback Visa card offers cashback on groceries from stores like Giant, AEON Big, Tesco, Cold Storage, Econsave, Mydin and more. Therefore, you should take note and mindful of these exclusions for the cashback credit card. For example, CIMB’s Cash Rebate Platinum MasterCard gives you an attractive 5% cashback on your online spend, but it excludes airlines spending, utilities, telco and insurance.

Cashback credit card can also be limited by the days you swipe the card. For example, the UOB One card gives 2% cashback on petrol and cinema during weekdays, but 5% during the weekend. Similarly, the Maybank Islamic masterCard Ikhwan Card-i gives 5% cashback on petrol and groceries, but only on Friday and Saturday. So determine whether you are a heavy weekday spender or a heavier weekend shopper.

Make sure the stores and brands that you frequently spend at is part of the cashback terms and conditions and not on the exclusion list. Make sure you know your spending habits and get the right card suited to your lifestyle needs.

Annual fee                   

Before taking on a cashback credit card, make sure the cashback you will receive weighs up against the annual fee of the card. For example, the Standard Chartered’s JustOne Gold card will cost RM265 in annual fees, but allows you to earn RM840 in petrol cashback. Always calculate to ensure the cashback and other benefits will outweigh the annual fee you pay by a fair extent.

 

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The weighted average percentage calculation

Before deciding on which cashback credit card to get, you should figure out the actual percentage of cashback you can earn with every RM1 spent, and you give weight to each spending category. You can do so by using the weighted average percentage calculation as per below:

Weighted average percentage = the sum of (spending % x cashback rate %)

Here’s a sample calculation:

HSBC Amanah MPower Platinum Credit Card-i 

 

Category

Spending (%) Cashback (%) Cashback earned (%)
Online 8 0.2

0.02

Groceries

25 8 2
Utilities 10 0.2

0.02

Retail

12 0.2 0.02
Petrol 20 8

1.6

Dining

15 0.2 0.03

Other

10 0.2

0.02

Weighted average

3.71

Citibank Cash Back Credit Card

Category

Spending (%) Cashback (%) Cashback earned (%)
Online 8 0.2

0.02

Groceries

25 2 0.5
Utilities 10 0.2

0.02

Retail

12 0.2 0.02
Petrol 20 5

1

Dining

15 0.2 0.03
Other 10 0.2

0.02

Weighted average

1.61

The calculation above shows that every RM1 spent using HSBC Amanah MPower Platinum Credit Card-i gives you 3.71% in cashback on average. On the other hand, you earn 1.61% on average with every RM1 spent by using Citibank Cash Back Credit Card.

Therefore, HSBC Amanah MPower Platinum Credit Card-i is the winner when it comes to greater cashback savings. But, will you stick with the same budget for the long term? You can use this formula on any of the cashback credit cards to consider your spending habits before deciding which card is best for you.

The terms and conditions

A credit card’s terms and conditions is important as it is a formal statement of the rules and guidelines that will govern the relationship between a credit card issuer and a credit card holder. A credit card’s terms and conditions will also spell out the fees and interest charges you could incur as a cardholder.

Aside from that, the terms and conditions will describe how the credit card company will calculate your balance and what actions will trigger the penalty (e.g. missing minimum payment deadline). So make sure you read through the terms and conditions of a cashback credit card before applying for it. It’s boring, but it will help you to maximize the returns you can get from the card by knowing all the details and how the cashback system works.

what is a cashback credit card

 

What are the pros and cons of a cashback credit card?

Pros

You can save money

Provided you use it right, taking into account of the exclusions, minimum monthly spend and other terms and conditions of the cashback credit card, you can enjoy saving money by using a cashback credit card. A cashback credit card is also better than points or miles, which limit your redemption, while cash is cash. Cashback is also the most popular category in Malaysia

Extra cashback on certain spending categories

A cashback credit card can help you enjoy even greater savings as you can get more cashback on certain spending categories. For example, you can save on petrol, groceries and even when paying bills depending on the cashback credit card. So by making use of a cashback credit card that gives extra cashback on the categories that you spend most on, you can rack up even more cashback returns.

See also:

The Best CashBack Credit Cards For Groceries
Best Credit Cards to Pay Utilities Bills in Malaysia
The Best Petrol Credit Cards For Malaysians

Enjoy introductory rates and bonus cashback

Sometimes, as an incentive to cardholders, banks may offer introductory 0% interest rates, and even bonus cashback for new cashback credit cardholders. Take advantage of it as you can further maximize your savings during this duration. However, do be careful as the introductory offer is usually for a limited time only, take note of the promo duration so you don’t get caught off guard with higher interest or lower cashback returns.

Cons

You spend more

As discussed above, some cashback credit cards require minimum spend in order for you to be eligible to receive cashback. As such, this may cause you to spend more than you need for that month just so you can receive the cashback.

Cashback vs. rewards vs. air miles

Are you still unsure which type of credit card would suit you best? Here is a brief explanation of the key differences between a cashback, rewards and air miles credit card to help you make the right decision.

As discussed earlier, a cashback credit card gives you cash back for every ringgit you spend. However, you need to be aware of the cashback rates, limits, minimum spend, exclusions and more. A cashback credit card is suitable to enjoy savings for spending on categories such as petrol, groceries and retail outlet shopping. If these are among the categories you spend most on, a cashback credit card would be suitable for you and help you save money.

While a rewards credit card earns the cardholder rewards points from the card issuing bank. Rewards points are another form of incentive offered by banks and are calculated based on the amount of money you spend on your credit cards. By collecting rewards points, you can redeem different types of products, such as electronics, furniture, shopping vouchers and more. There are different tiers for a number of rewards points you can earn based on the spending category. You should always choose a rewards credit card that gives you the most value based on your spending habits. If you are smart with your spending, you can redeem points to get more value for your ringgit.

As for air miles credit cards, it gives you air mile points for every Ringgit spend locally and also overseas. The air miles can then be used to redeem airline tickets or upgrades. Air miles credit card is popular with frequent travellers as they can enjoy additional perks like access to airport lounges, free travel insurance, discounts on hotels and overseas dining. Each bank has its own redemption rate for air miles credit cards, so make sure to find one that will offer you the most value from.

See also:

Credit Cards: Cashback vs. Rewards
Here’s How to Fly Further With Your Air Miles Credit Card

List of cashback credit cards in Malaysia

AEON

  • AEON Classic Visa / Mastercard Card
  • AEON Gold Visa / Mastercard Card
  • AEON BiG Visa Classic Card
  • AEON BiG Gold Visa Card

AFFINBANK

  • AFFINBANK Visa / Mastercard Classic
  • AFFINBANK Touch ‘n Go Mastercard Classic
  • AFFINBANK BHPetrol ‘Touch & Fuel’ Mastercard Contactless
  • AFFINBANK Visa / Mastercard Gold
  • AFFINBANK Touch ‘n Go Mastercard Gold
  • AFFINBANK World Mastercard

Alliance Bank

  • Alliance Bank You:nique Rebates

AmBank

  • AmBank CARz Platinum Mastercard
  • AmBank Islamic CARz Gold Visa Card-i
  • AmBank Islamic CARz Card-i Platinum Mastercard
  • AmBank CARz Gold Visa

Bank Islam

  • Bank Islam – Alumni UiTM Platinum Mastercard Credit Card-i

CIMB Bank

  • CIMB Islamic PETRONAS Mastercard
  • CIMB PETRONAS Mastercard
  • CIMb Tesco Mastercard
  • CIMB Visa INFINITE

Citibank

  • Citi Cash Back Card
  • Citi Cash Back Platinum Card
  • Shell-Citi Credit Card

Hong Leong Bank

  • Hong Leong WISE Gold Card
  • Hong Leong WISE Platinum Card
  • Hong Leong Essential Card
  • Hong Leong Fortune Card
  • The Store Pacific Hong Leong Gold Mastercard
  • The Store Pacific Hong Leong Platinum Mastercard

HSBC

  • HSBC Amanah MPower Visa Platinum Credit Card-i

Maybank

  • Maybank Visa Signature
  • Maybank 2 Platinum Card
  • Maybank Islamic PETRONAS Ikhwan Visa Gold Card-i
  • Maybank Islamic PETRONAS Ikhwan Visa Platinum Card-i
  • Maybank Islamic Mastercard Ikhwan Gold Card
  • Maybank Islamic Mastercard Ikhwan Platinum Card

OCBC Bank

  • OCBC World Mastercard
  • OCBC Titanium Mastercard Blue / Pink
  • OCBC Cashflo Mastercard
  • OCBC 365 Mastercard

Public Bank

  • Public Bank Visa Signature Credit Card
  • Public Bank – Petron Visa Gold Credit Card
  • Public Bank Quantum Visa Credit Card
  • Public Bank Quantum Mastercard Credit Card
  • Public Bank – AIA Visa Gold Credit Card
  • Public Bank Visa Infinite Credit Card
  • Public Bank Visa Platinum Credit Card / Mastercard
  • Public Islamic Bank Visa Platinum Credit Card-i / Mastercard Platinum Credit Card
  • Public Islamic Bank Visa Gold Credit Card-i / Mastercard Gold Credit Card-i
  • Public Bank Visa / Mastercard Gold Credit Card

RHB

  • RHB Signature Credit Card
  • RHB World Mastercard Credit Card
  • RHB Smart Value Credit Card
  • RHB Islamic Smart Value Credit Card-i
  • RHB Islamic World Mastercard Credit Card-i
  • SOGO-RHB Credit Card

Standard Chartered Bank

  • Standard Chartered JustOne Platinum Mastercard

UOB

  • UOB ONE Card
  • UOB Lady’s Classic Mastercard
  • UOB Lady’s Platinum Mastercard
  • UOB Lady’s Solitaire Mastercard
  • UOB YOLO Card

See also: The best cashback credit cards in Malaysia

Top 3 best cashback credit cards in Malaysia

Here are the best cashback credit cards in Malaysia to help you save even when you’re spending.

Standard Chartered JustOne Platinum Mastercard

This cashback card offers tiered cashback rates, so you don’t have to spend a minimum amount before you can enjoy receiving the cashback. You can also get cashback on all other spend that does not fall within the three major categories. The maximum cashback rate is 15% with this card, but this depends on the amount charged to the card.

Another plus point of this card is the exclusive offers:

  • RM7 per ticket for any movie via Golden Screen Cinemas website and mobile app. Valid until 27th February 2018
  • 1 for 1 hand roll and blue plate at Sakae Sushi, valid until 30th June 2017

Requirements:

  • Minimum monthly income of RM2,000 (RM24,000 per annum)
  • Annual fee: RM 265 for principal cardholders and free for supplementary card holders

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Hong Leong WISE Gold Card

The Hong Leong WISE Gold Card allows you to choose the spending categories of your choice, so this card can suit your spending habits and can help you to maximize your cashback. The categories you can choose from are:

  • petrol
  • utilities
  • mobile
  • entertainment
  • travel
  • pharmacies
  • dining
  • groceries
  • book stores

You can make changes to the categories you have chosen, but you will be charged RM10.60 for each change. To enjoy the 10% cashback the requirement is a minimum of 10 retails transactions monthly, with a minimum spend of RM50 per transaction. The cash back is capped at RM100 while the minimum spending required to receive maximum cash back is RM500.

Requirements:

  • Minimum monthly income of RM2,000 (RM24,000 per annum)
  • Annual fee: RM169.90 for principal cardholders and RM84.80 for supplementary card holders

MY_CTA_Button_Applynow

Alliance Bank You:nique

This card offers unlimited cashback on your spending, meaning you can enjoy more savings. The cashback is tiered based, so you can get up to 3% if you spend between RM2,001 – RM3,000 monthly and charge it to the card. If you spend RM3,000 monthly, you will get RM50 rebate. It is calculated according to the tiers:

  • RM5 for the first RM1,000
  • RM15 on the next RM1,000
  • RM30 on the remaining RM1,000

You can also personalize this card, imagine having a card with a picture of your choice, even a picture of yourself or your loved ones. The annual fee is RM148 but will be waived for the first 3 years. For the subsequent years, you’ll be able to get this amount waived if you spend RM5,000 annually or 12 swipes in a year.

Requirements:

  • Minimum monthly income requirement of RM2,000.
  • 21 years old for the principal cardholder and at least 18 years old for the supplementary cardholder.
  • Malaysian citizens only.

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Where to apply for cashback credit card?

You can use our free comparison tool to find the best cashback credit card to suit your spending style. You can then apply for free through our website. If not, you can apply through the bank’s website or walk into any one of the bank branches in Malaysia.

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