Credit card rewards can be a fantastic way to save money, but misuse can lead to mounting debt. Here’s how to maximise your rewards without falling into financial trouble.
Earn rewards without overspending or unnecessary purchases.
Choose cards that match your spending habits and lifestyle.
Track expenses and set limits to stay debt-free.
Credit cards are often viewed as risky, yet they can offer great benefits if managed wisely. With the right strategy, you can earn cashback, points, or miles without compromising your financial health. Let’s explore how to make the most of credit card rewards without incurring debt.
Understand your spending habits
Before diving into credit card rewards, start by analysing your spending patterns. Are you more inclined to spend on groceries, dining out, travel, or online shopping? Selecting a card that offers the highest rewards for your regular expenses ensures you’re not chasing rewards but earning them naturally through everyday purchases. For example, if you spend a lot on fuel, consider a card like the HSBC Visa Platinum Card, which offers high cashback on petrol.
Pick the right rewards program
Not all reward programs are created equal. Some cards offer cashback, while others provide travel miles or points redeemable for products and services. Determine which type of reward aligns best with your lifestyle and goals. Here is a guide:
| Type of spender | Recommended credit card | Key benefits |
| Frequent travellers | Citi PremierMiles Card | Earn air miles; complimentary lounge access |
| Everyday shoppers | American Express Singapore Airlines KrisFlyer Card | Earn air miles; travel perks |
| UOB One Card | Cashback on groceries and utility bills | |
| Online shoppers | DBS Black Card | Additional points and discounts on e-commerce platforms like Lazada and Shopee |
Stick to a budget
It’s easy to overspend when chasing rewards, but this can quickly lead to debt. Avoid this trap by setting a strict monthly budget for your credit card use. Spend only what you can afford to pay off in full at the end of each billing cycle, thus avoiding high interest charges. Remember, the rewards are only valuable if you’re not paying more in interest than you’re earning back.
Take advantage of sign-up bonuses—carefully
Many credit cards offer enticing sign-up bonuses, such as a large number of points or cashback if you spend a specific amount within the first few months of opening the account. Cards like the Citi Rewards Card offer substantial bonuses for new customers. Plan strategically when applying for new cards. If you’re making a planned big purchase, it could help you meet the spending requirement without stretching your budget. However, don’t fall into the trap of spending unnecessary just to earn the bonus.
Use automatic payments to avoid late fees.
If you fail to pay your bill on time, as all good credit card users are required to do, and if it results in penalties or an increased rate of interest, those rewards will be very quickly wiped out. Automatic payment will never miss any due date. Remember, the full balance method ensures that you leave no stone unturned and do not accrue any interest while keeping your credit score shiny. Or just set a spending alert the moment you sign up and track yourself throughout the month if overdraft is concerning.
Redeem rewards strategically
It's easy to withdraw your rewards immediately after you have earned them, but patience pays off . There are a ton of rewards programs out there that provide higher value for redemptions towards particular purchase types or where the points/miles go further. For instance, miles on the Standard Chartered Visa Infinite Card might stretch further in terms of value for flights rather than gift cards. There are some cashback programs that give you a higher percentage when redeeming for statement credits compared to direct deposits. Read your program's terms and conditions so you know how to redeem points, cashback, or miles most effectively.
Be cautious about annual fees.
Credit cards that offer the best rewards often come with annual fees. These fees can range from $50 to $500 or more. Before committing, weigh the potential rewards against the cost. For instance, the American Express Platinum Card offers numerous perks but has a hefty annual fee. If the benefits and rewards you expect to earn outweigh the fee, it might be worth it. However, if you don’t think you’ll use the card enough to justify the annual fee, consider a no-fee alternative like the OCBC 365 Credit Card.
Monitor and Track Your Spending
One of the best ways to avoid falling into debt is by actively tracking your spending. Use apps or budgeting tools like Mint or YNAB (You Need A Budget) to keep a close eye on your credit card usage. This will help you stay within your set budget and ensure you don’t overspend in pursuit of rewards. Many banks, including DBS and OCBC, also offer insights and analytics on spending trends, which can be a useful tool for managing finances.
Maximising credit card rewards without accumulating debt requires smart spending, strategic planning, and disciplined budgeting. By understanding your spending habits, choosing a card that aligns with your lifestyle, and sticking to a budget, you can make the most of your credit card rewards. Always aim to pay off your balance in full each month to avoid interest charges. When used correctly, credit cards can be a powerful tool for savings, providing benefits without the risk of falling into a debt trap.