How rewarding are reward cards?

Never spend money just to get points, but rather, use a card when you are purchasing things you were going to buy anyway.

EVEN though cashback remains the most popular benefit for credit cards, there are still more than 100 cards which offer reward points in Malaysia. 

You can obtain the most amazing gifts with points. From the mundane annual fee waiver, cash vouchers and household appliances, to trolleys, watches and perfumes. But you need to pay attention to not get caught by surprise. 

What are the most notorious pitfalls for Malaysians?

Point exchange rate and devaluation. It’s awfully nice to have 100,000 points in your account, but it is quite meaningless until you know the exchange rate. Do 100,000 points buy you a top end smartphone, or a RM50 voucher at a hypermarket? 

You typically need between 200 to 500 points for RM1 value. Your biggest risk is if a bank announces it will devalue the points and you suddenly have to pay double the amount of points to buy the same item from the catalogue. 

Catalogue

Speaking of catalogues, be sure to browse through a few from different banks before you start collecting. 

Of course a catalogue update could also mean your coveted item is no longer up for grabs. Some banks allow you to pay with your points at certain merchants, which greatly expands the products that you can buy with your points.

Expiry date

Not all points are created equal. Whereas some points never expire, some points have a 3 year expiration date! If you are saving up for a big ticket item, take note of expiration dates, as it might mean you are losing each month as many old points are you are acquiring new ones!

Exclusions

Sometimes the places you spend most money, are excluded from raking in points. Specifically: think petrol and utilities. So if you drive a gas guzzler and want to get some benefits out of your petrol expenses, I suggest getting a separate credit card that maximises your petrol cashback. 

Rather than excluding some categories, some cards only give you reward points for a single category, such as overseas spend or spend from a certain chain of stores. 

Fine print

Everybody loves to receive five times or eight reward points. But in order to be eligible you sometimes first have to register, send a text message to a phone number or sign up online. The promotions are also typically limited in time, which means you have to take note of the start and ending date, to ensure you are eligible.

Maximum spend

Watch out if you want to go all out on a promotion. Often, the number of points is limited to a maximum amount of monthly spend. This means that if you spend more than – for example - RM3,000, your rewards will drop back from five points per Ringgit, to one point per Ringgit. 

Eligibility

Note that if you have a business card, a co-branded card or are defaulting on your credit card payments, you might not be eligible for reward points. If you cancel your card, you forfeit your points as well. You are also not eligible for points if you have a card that has been issued abroad by a bank that also operates in Malaysia.

Finite supply

Banks don’t print points as they print money. Although the stock of points seems massive – for example 500 million points – banks do warn that the amount of points is limited and they won’t give points after they have run out of the allotted amount.

Never spend money just to get points, but rather, use a card when you are purchasing things you were going to buy anyway. As long as you are aware of these pitfalls and know what these points can get you, you are in great shape to benefit from reward credit cards.

Mark Reijman is co-founder and managing director of http://www.comparehero.my/ dedicated to increasing financial literacy and to help you save time and money by comparing all credit cards, loans and broadband plans in Malaysia.