Cashback or reward points: how to choose your credit card rewards

Intro

If you are not sure whether to choose a cashback card or a reward points card, start with cashback.

For most people, that is the safer default. Reward points are not bad. They can give better value when used for air miles, but only if you know what you are collecting for, which trip you want, and roughly how long it will take to get there.

If your monthly spend is not high, say under RM5,000, cashback is probably the cleaner choice. Not because points are useless, but because earning enough points for a flight often takes longer than people expect. The longer it takes, the more things can change: conversion rates, points expiry, and even your travel plans.

What is cashback?

Cashback is straightforward.

You spend on the card, and the bank gives part of that amount back to you as a rebate, statement credit, or something similar.

It is also easier to estimate. If a card gives 5% cashback, RM1,000 of spending can theoretically return RM50. Of course, the final amount still depends on the cap, spending category, and minimum spend.

Common limits to check:

• Category: which spending earns cashback, and which transactions are excluded
• Cap: how much cashback you can earn, including total caps and category caps
• Minimum spend: whether you need to spend a certain amount first

Cashback cards still have rules. They are just usually easier to understand. You can also use AorB's cashback calculator to estimate how much cashback your spending may earn.

What are reward points?

Reward points are not cash. They only become useful after you redeem them.

You may be able to redeem points for cash, vouchers, catalogue items, air miles, or other rewards. Some cards advertise 5X, 8X, or 10X points, which sounds high, but the multiplier alone does not mean much.

What matters is what those points can actually get you.

For example, two cards may both give 10X points. With Bank A, 10,000 points can convert into 1,000 miles. With Bank B, you may need 20,000 points for the same 1,000 miles. Same multiplier, very different result.

So do not stop at the points rate. A high multiplier does not automatically mean high value.

If you are collecting points for air miles, CPM is usually more useful to look at. You can think of CPM as the cost of earning each mile. The lower the number, the more miles you get from the same spending.

Why points are usually better for air miles

Most of the time, redeeming points for vouchers or catalogue items gives average value. Sometimes cashback would have been cleaner.

Air miles are where points become more interesting. Business class, long haul flights, and some airline redemption promos can give better value.

Economy class can still make sense too. It depends on the route, the miles needed, the taxes, and whether you would have bought that ticket anyway.

Start with the travel goal before choosing a points card

Before choosing a points card, first decide which airline miles you actually want.

Then look at the route you are interested in. How many miles does that ticket need? Based on your normal spending, how long would it take to earn enough?

If you do not know which airline or route you want, the value of a points card is hard to judge. The card is just a tool. What matters is whether you can redeem the flight you actually want.

Local and overseas spend are very different

Many points cards put their highest earn rates on overseas spend or foreign currency transactions.

This is where people often misread the card. It may look like the card gives 5X, 8X, or 10X points, but local spending may earn only 1X or 2X. If most of your spending is in Malaysia, the high multiplier may not apply very often.

Overseas spending also comes with FX mark up or foreign currency fees. Paying extra just to earn more points may not be worth it. On the other hand, a card with no FX mark up can be worth comparing if you travel or shop overseas often.

When you see a high multiplier, ask one question first: is this rate for local spend or foreign currency spend?

The timeline test: how long before you can redeem?

Points are future value. The longer you wait, the more risk you carry.

As a rough guide:

• If you can earn enough miles within 6 to 12 months, a points card may make sense
• If it takes 1 to 2 years, it may still be okay, but you need to check whether the wait is worth it
• If it takes more than 2 years, the risk becomes much higher

Time matters because banks can change conversion rates, and airlines can increase the miles needed for redemption. Points can expire. Your travel plans can change too.

Cashback cards can also change their rules, of course. But cashback is usually received faster, so there is less waiting risk.

When to choose cashback and when to choose points

Choose cashback if you want something you can see every month.

It fits better if:

• You do not have a clear airline or route in mind
• Your monthly spending is not high
• You do not want to study redemption charts or conversion rates
• Most of your spending is local daily spending
• You want to avoid points devaluation or expiry risk

Choose points if you already know what you want to redeem.

For example, you know you want KrisFlyer, Enrich, AirAsia Points, or another airline programme. You also know roughly how many miles you need. Your spending is enough to reach the target within a reasonable time, and you are willing to wait for a good redemption opportunity.

If your spending is mostly small local transactions and you do not have a clear travel goal, a points card may only look more attractive. Once you do the maths, cashback may still be better.

Do not split your spending without doing the maths

Using a few cards at the same time is not wrong. It can work, but you should do the maths first.

Cashback cards may have minimum spend requirements. If you spread spending across too many cards, each card may fall slightly short. Points cards can be trickier because your points may sit inside different banks or different airline programmes.

A bit of Enrich here, a bit of KrisFlyer there, some AirAsia Points somewhere else. It looks like you have rewards everywhere, but when you actually want to redeem, every account is short.

If you are new to credit cards, starting with one or two cards is easier to manage. Once you understand the categories, caps, minimum spend, and redemption rules, adding more cards becomes safer.

One card used well is often better than three cards used badly.

Easy traps to avoid

The problem is not always the card. Often, it is just that the conditions were not checked properly.

• Seeing 10% cashback but missing the monthly cap
• Seeing 10X points but not calculating how many miles you can actually get
• Ignoring minimum spend
• Missing excluded transactions such as e-wallet reloads, government payments, utilities, and insurance
• Letting points expire before reaching a useful redemption

Final verdict

For most people, cashback is the better default. It is simple, fast, and harder to overestimate.

Points cards are better for people with a clear travel goal, enough spending, and a realistic timeline to redeem before the value changes. If one of those pieces is missing, points become less attractive.

If you are unsure, start with cashback. Move into points only when you know exactly what you want to redeem.