Miles vs Cashback - Which credit card reward give better value?

The clash of credit card rewards - Miles vs Cashback has been an ongoing war stretching back many years. We used to be in the Cashback camp, and switched over in 2018 after being caught by the travel bug.

The Team Cashback vs Team Air Miles campaign prompted us to relook this great war and determine which one wins for us. Could this analysis reveal surprise finds?

Disclaimer - We currently have no cashback cards, as we prefer to commit fully to our miles game. This is the first time we do a deep dive on cashback cards. Will we switch back to the Cashback camp after this?

No Two Credit Cards Are The Same

Credit cards reward you when you spend on dining, groceries, shopping, transport, etc. And it is up to you, the consumer, to read their T&Cs to understand which MCCs are considered eligible spends. Take Dining for example, Citi Cash Back card does not include 5462 (Bakeries) while HSBC Live+ card does. Essentially, credit cards (Miles and Cashback) define categories differently, even for cards from the same issuing bank.

Miles and cashback cards come in all forms, craving different spaces to attract different consumers. So what is the “best” card for you will depend on your spending habits and preferences. We chose cards for specialised spending because they give the most miles and cashback on selected and useful spending categories.

These cards aren’t objectively the “best”, but make decent comparators for people who spend $1K or more every month using their credit cards.

Meet Our Credit Card Contenders

“Best” Miles Credit Cards

One of the most popular cards for mile-chasers because it uses a blacklist system for online purchases. The Amaze Card hack extends its powers. $1,000 eligible spent gets you 4,000 miles.

THE card to use for in-store payments. Make sure to add this card to Apple Pay or Google Pay to meet the mobile contactless payments criteria. $1,110 eligible spent gets you 4,440 miles.

With the higher cap of $2,000 across 2 selected categories and if we ignore the irritating $5 spending block, we could potentially get 8,000 miles per month. Deposit $10K with UOB Lady’s Savings account to upsize the miles to 12,000 a month. That’s a power uppercut to Cashback!

How Much Is a Mile Worth?

We recently re-evaluated the value of a mile and the TD;LR:

This allows us to put a value to the miles we earn from the above cards:

Effectively, the “cashback” from miles if we value each mile at 1.38¢ is between 5.52% to 8.28%. If we value each mile at 1.64¢, the “cashback” from miles is between 6.56% to 9.84%. That’s pretty attractive! And no minimum spend criteria!

“Best” Cashback Credit Cards

With a lower $400 minimum spend, and the highest cashback for general spend, this credit card makes a decent all-rounder cashback card if you swipe at places that accept Diners Club. Else there is also the DCS Ultimate Platinum Mastercard with 2% cashback, with no minimum spend.

Our next 2 cashback cards give more than 5% cashback for specific categories.

Assuming you don’t drive, you will need to spend $1,500 on dining and groceries to hit the $80 cashback cap. However, if you do drive and spend $400 on petrol, you will need to spend $800 on dining and groceries before hitting the $80 cap.

The current +3% promo makes this card very attractive for cashback. In the most optimized case scenario, we could spend $3,125 on dining, shopping and entertainment over 3 months to get $250 cashback.

With Miles’ 5.52% to 8.28% comparable to Cashbacks’ 5 to 8%, is this a Draw then?

How Much Miles or Cashback Can We Really Achieve?

It helps to see how these cards perform irl so let’s put these numbers into context.

Here are 2 hypothetical examples - Jamie (who is single), and Lee Family (husband, wife and a 7-yr old). Their spending per month using credit card (ie. we cannot use credit cards for some expenses) across eligible categories could look like this:

The best combination of the above Cashback cards that Jamie and Lee Family can use to get the most cashback could yield them $100 and $213 respectively. At least while HSBC Live+ 3% additional cashback is on. Over 12 months, that adds to $1,268 and $2,556 extra to spend. Not bad!

The best combination of the above Miles cards that Jamie and Lee Family can use to get the most miles could yield them 7,600 and 16,800 respectively. That is 91,200 and 201,600 miles a year!

What can they use these miles for?

How Much Value Can You Get from Miles?

Using Google Flight data on Singapore Airlines prices and SQ’s Saver Award chart:

With 91K miles, Jamie will have enough for 2 economy class return tickets to Perth (86K miles) worth $1,662. Or she could pamper herself with a business class return flight to Shanghai (86K miles) worth $3,354.

With their miles, Lee Family could redeem 3 economy class return tickets to Melbourne (183K miles) worth $3,186. Alternatively, they are just 2,400 miles shy of 3 business class return flights to Hong Kong (204K miles) worth $7,971.

Which feels more shiok?

This summarizes the main argument for most mile-chasers - it is more shiok to travel in business class. In fact, seasoned mile-chasers can find even better value for their miles (eg. SQ Spontaneous Escape, redeem miles on other FFPs, etc).

If you love to travel, going for miles is super attractive for sure. Even the occasional traveller would wanna experience business class once, isn’t it? 😂 

Is Cashback Really That Unattractive?

No. Most of the reasons why cashback is attractive to some are the same reasons why miles are not attractive.

Like we shared in our recent post about valuing a mile, we should never hold on to miles.

There is nothing surer than to have cash in your hands. Because you can do anything with the extra cash instead of being limited to what credit card points/miles can be redeemed for. A distinct example - The Lees can invest their $2,556 for compounding returns, something you cannot do with miles.

Why Miles are unattractive compared to Cashback:

1. Miles devaluation happens regularly and can come without warning.

2. There will be orphaned miles/points. You can potentially waste many miles/points across different FFPs if not careful.

3. You need to pay conversion fees when you transfer miles from credit card to FFP.

4. Credit cards have limited transfer partners. With cash, you can buy any airline ticket you want.

5. You need to pay additional fees when booking flights using miles.

6. Some miles credit cards have shenanigans that disadvantages us (eg. UOB’s $5 blocks).

7. Miles are worthless in small quantities. You can use $20 cashback, but you can’t do much with 200 miles.

8. There is a minimum miles quantity required for redemptions, for low spenders, it may take longer to accumulate sufficient miles.

9. Miles have expiry dates. Cash is cash.

10. The Miles game is generally more complex than the Cashback game.

Things To Note

1. We didn’t discuss comparisons for ad-hoc or large spending. One decent option for the Cashback camp is DCS Ultimate Platinum with 2% cashback. A decent option for the Miles camp is UOB PRVI Miles with 1.4 mpd. Both don’t require minimum spend.

2. Knowing MCCs are also important for specialised cashback cards. Heymax.ai is a convenient tool to check for MCCs for both camps.

3. We ignored credit cards with rewards points, because it is at an awkward in-between the two, and the good miles cards convert points to miles.

4. We can use both Miles and Cashback cards when we know how to optimize between them to fit our own spending patterns. Don’t be loyal to the card or game, be loyal to yourself 😎

Ultimately, we still prefer the miles game because we love travelling and don’t mind playing the (complex) game to extract the most value of our miles. But this analysis made us realise that there might be a space for Cashback cards in our wallets. Perhaps if more miles credit cards are nerfed in the future? But we hope that day will never come 🤞

Which do you prefer - Miles or Cashback?

Ending Brainteaser

We started this analysis expecting Miles to win by a mile, and didn’t expect Cashback to put up a tough fight. This analysis also made us question the value of a mile, but from the banks’ perspective.

Assuming that banks would prefer consumers to take miles instead of cashback (since banks are in the business of collecting cash and not miles), it is possible to calculate how much banks value a mile by comparing the rewards they give for general miles and cashback cards.

Is it possible that OCBC values a mile at 1.23¢? Or, is Citibank’s miles acquisition cost higher than UOB? Or, should we value our mile at 1.33¢ instead?

No matter what you conclude from this brainteaser (we still value a mile at 1.38¢), the quest for cheap cpm offers continues for us mile-chasers!

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