Thursday, May 29, 2014

Are Credit Card Reward Programs Worth the Hype?

I am such a willing victim to rewards programs. You have to admit that there is just something innately irresistible in being rewarded for spending money. Y to the ES please!

But as I eventually found out, rewards programs are not all they're cranked up to be. If you're not a heavy credit card user, then the rewards due you are minimal to the point of being ludicrous.

For example, I earn a point for every Php125 (retail: supermarket, gas, drugstore) or Php36 (non-retail) I charge on my RCBC Bankard Mastercard Classic. I charge most of our monthly expenses, thus I rack up around Php15,000 - Php20,000 in charges per month (which I always pay off in full). Assuming that all of my charges are retail charges, I earn between 120-160 points per month (Php15,000 / Php125). In a year, I charge between Php180,000 to Php240,000 to my credit card, so that's about 1440 - 1920 points per year.

I usually avail of a cash credit which I then apply to my outstanding credit balance. And so once a year, with my 1920 points, I get a Php400 credit towards my credit card balance. Here's the rewards conversion for cash credit:

  •     800 points = Php200

  • 2,000 points = Php500

  • 4,000 points = Php1,000

  • 20,000 points = Php5,000

Thus, after spending about Php240,000 in a year, I am "rewarded" with a Php400 credit. It's silly right?

However, if you charge in a month what I earn in a year, then you'll be swimming in rewards points. A friend told me of someone whose family owns a factory, and how they charge their monthly utilities to a credit card, in effect charging close to a million pesos every month. It comes as no surprise then that that family has dozens of free tickets anywhere in the world at their disposal.

That's why I always roll my eyes whenever I read posts detailing what credit card is the best for you. I think that such posts should begin with: If you charge millions of pesos to your credit card every year, then read on. If not, feel free to skip this post and not waste your time.

If you must have a takeaway from this rambling-bordering on bitter post, it should be to not be too picky when it comes to credit cards and to not get one because of the rewards aspect. Really, unless you're a big spender, they're all the same. And most importantly, ALWAYS pay your outstanding balance in full.

If I have my way, I will change the name "credit card" to "convenience card", because that's how you should treat them. It's a convenient cash advance so that you don't have to go to a Bayad Center to pay for an airline ticket or line up at an ATM to withdraw cash for your groceries. It's also a great way to pay for a big ticket item on installment basis. As long as you play it smart, your credit card can be your best friend. However, the moment you miss even one payment date, then it will waste no time in bitchslapping you with all sorts of penalties and finance charges.*

Remember kids, credit cards may seem as if they're the answered prayer to your dreams of traveling, a new wardrobe and living it up. But they're not. Like everything else in life, if it seems too good to be true, be very, very wary or better yet, run the other way.

*Actually, the penalties and interests contained in credit card Terms and Conditions have already been shot down as iniquitous, excessive and unconscionable by the Supreme Court, but even so, pay off your balance in full. I'll write more about this in a future post.


  1. Right now, I feel more rewarded with Security Bank Debit Master Card, 5% rebate on groceries ngayon. Tapos merong feeling na parang napprevent ka pa din gumastos kasi actual na pera mo yung nasa account.

    I am following Dave Ramsey on youtube. Sobrang against sya credit cards kahit may rewards. Kasi daw, when you swipe via credit card, hindi daw na-aactivate yung pain sensors ng brain. So, we tend to spend more with the card. That said, I still keep the card. Pero I'm happy I'm debt free. Yung rewards ko parang naging pambayad na lang ng annual fee (still need to learn how to negotiate).

  2. I am an RCBC credit card user and I agree with you that their rewards program is really cheap. I really want to change it but I think it will be harder to get new ones these days. Their customer service also suck.

    By the way, the link you gave is mostly American Banks. How can normal Filipinos avail of it? I doubt it.

  3. Hi Kara,

    I agree that the RCBC rewards program is not rewarding at all, but I'm fairly happy with their customer service. I signed up for a text update whenever my card gets charged more than Php1,000 and I was able to catch an unauthorized purchase this way. Then when I reported it to RCBC, the SA immediately flagged the charge and it wasn't reflected in my statement of account.

    Regarding the link, it's been changed. It used to be a list of Philippine credit cards. Thank you for pointing it out though, I will remove it from the post since Filipinos residing in the Philippines usually can't avail of US credit cards. Which is such a shame because it's the US credit cards that give the awesome rewards and travel perks.

  4. Hi Rae!

    Sorry for the extremely late reply. I don't negotiate with my annual credit card membership fees, I just instruct the CSR to cut the card if he/she won't cancel the fees and 9 out of 10 times, the bank gives in. The one time I was unsuccessful was with my RCBC Mango card because the membership fee was charged monthly at Php100/month. They didn't want to waive it, so I had the card cut. I still had 3 other credit cards though, so it was no biggie.