Maximise your Credit Card Miles and Cashback Using Cardup Singe

Maximise your Credit Card Miles and Cashback Using Cardup

I thought I had a conclusion deciding between Cashback or Airmiles when using a credit card. However, the existence of CardUp might change the entire equation all together.

[If it matters, this is not a sponsored post.]
Maximise your Credit Card Miles and Cashback Using Cardup Mainpage

Maximise your Credit Card Miles and Cashback Using Cardup Mainpage

 

What is CardUp?

CardUp is a platform that enables payment and collection of big expenses using existing credit cards, in places where cards are not accepted today. Example of such expenses includes rent, income taxes, educational loan, insurance (usually points are not applicable for insurance) etc. CardUp allows you to use credit cards to pay for those bills.

One of my friends shared with me that he had to PayLah his landlord his monthly rental of $1000. Unfortunately, most landlords do not accept credit cards. $1000/month is a big expenditure and if he is able to use a credit card, he might be able to collect cashback or airmiles along the way.

 

How does CardUp work?

Basically, CardUp acts like a middleman. You pay CardUp via credit card, CardUp will pay your vendor/suppliers/landlord for you.

In doing so, you get to collect cashback or airmiles which will otherwise be lost if you make a normal bank transfer. CardUp is currently a plug and play system. Simply sign up for an account, enter the details of your preferred credit card/s and you can start to  make and schedule payments.

CardUp will take a processing fee of between 2.25% to 3.3% for that transaction. Typically, it will take around 3 business days for your recipient to get the money. However, if you need a next day transaction, an additional 0.3% fee applies.

Currently, CardUp is able to perform transaction for the following.

  1. Rental payments (to a landlord)
  2. Rental deposits (to a landlord)
  3. Condominium Maintenance Fees (to a MCST or property developer)
  4. Tuition/School fees (to Singapore based schools or education centres)
  5. Insurance Premiums
  6. Income Tax/Property Tax/Corporate Tax/GST/Stamp Duty
  7. Season Parking
  8. Car Loans
  9. Electricity
  10. Helper Salary
  11. Miscellaneous Payments
  12. Payroll
  13. Supplier invoices

I believe CardUp will expand their services in the years to come. I have bold a couple of expenses in bold because I believe those are the more general expenses that everyone will pay. We will be using it to illustrate whether it is worth it to use CardUp or not.

 

Is it worth it to use CardUp?

We have to set a few assumptions and context to see if it is worth it. In my previous article on whether you can afford cancer, a typical medium income in Singapore is $56,550. I will draw a few assumptions from this income.

Example #1: Eric (Single. Stays with parents. Pays some of the household bills)

Maximise your Credit Card Miles and Cashback Using Cardup Singe

Maximise your Credit Card Miles and Cashback Using Cardup Single

Eric is working as a marketing executive in a SME. His annual income is $60,000. His annual income tax is $1950 (we are assuming he do not have any other income nor reliefs). He lives with his parents in a 4 room HDB flat and is paying for the electric bills (Annual Electricity Bills: $1608. Source:Average monthly electricity bill of a 4-room HDB household). He pays around $9000 annually to an insurance company.

Total Annual Recurring Bills: $12,558 (or $1046.50/month)

Maximise your Credit Card Miles and Cashback Using Cardup UOB ONE CARD

Maximise your Credit Card Miles and Cashback Using Cardup UOB ONE CARD

As you can see in the above screenshot, Eric will have gotten a net saving of $130.

 

Maximise your Credit Card Miles and Cashback Using Cardup UOB PRVI MILES VISA CARD

Maximise your Credit Card Miles and Cashback Using Cardup UOB PRVI MILES VISA CARD

If Eric were to choose miles, he will have 17,178 Airmiles which he can use to change for an airticket once he have accumulated enough. (I’m putting $12,000 into income tax for simplified illustration purposes only)

 

Example #2: Joseph (Married with one child. Bought a house with wife. Pays some of the household bills)

Maximise your Credit Card Miles and Cashback Using Cardup Married

Maximise your Credit Card Miles and Cashback Using Cardup: Married

Joseph is working as a teacher. His annual income is $60,000. His annual income tax is $1950 (we are assuming he do not have any other income and excluding reliefs). He lives with his wife in a 4 room HDB flat and is paying for the electric bills (Annual Electricity Bills: $1608. Source:Average monthly electricity bill of a 4-room HDB household). He pays around $9000 annually to an insurance company. He also pays for his son’s childcare fees of $800/month (Annual: $9600). He also pays for the helper of $700/month (Annual: $8400).

Total Annual Recurring Bills: $30,558 (or $2546.50/month)

Maximise your Credit Card Miles and Cashback Using Cardup Cashback Example 2

Maximise your Credit Card Miles and Cashback Using Cardup Cashback Example 2

As you can see in the above screenshot, Jospeh will have gotten a net saving of $660.

 

Maximise your Credit Card Miles and Cashback Using Cardup Airmiles Example 2

Maximise your Credit Card Miles and Cashback Using Cardup Airmiles Example 2

If Joseph were to choose miles, he will have 42,945 Airmiles which he can use to change for a Business Class Airticket to Bali worth $1,154. His flight savings is $557. (I’m putting $30,000 into income tax for simplified illustration purposes only)

 

Conclusion

If the recurring bill amount is smaller, cashback might be the preferred option as you probably have to wait another full year to get enough airmiles to fly. However, if the recurring bill is larger, you might be slightly indifferent towards airmiles or cashbacks.

In whichever your preference, CardUp will help you collect cashback or airmiles which will otherwise be lost if you make a normal bank transfer.

Some last words of advice: CardUp dependent on the bank’s credit card benefits. Any change in the rules of credit card benefits / airmiles redemption will affect the calculation as of above. We are writing in the view of a personal finance perspective. We recognize there might be other cashflow benefits for businesses to use CardUp. The information is update on 12 Aug 2020.

 

 

 

No one will care about your money as much as you do.

In Wealth Management, it is important to Pay yourself first. Beware of scams. Before you invest in any company or popular investment opportunity, be sure to do your own due diligence. If you wish to learn more about investment, I hope to nurture genuine relationships with all of my readers.

Check out my most popular blog post in 2020 so far: 5 mistakes people make using their CPF.

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Cashback or Airmiles

Cashback or Airmiles: A Behavior Economics Analysis

The long debate between Cashback or Airmiles has been going on every since the existence of Airmiles. In Wealth Management, there are tons of literature whether Cashback or Airmiles which each camp strongly defending their point of view. I will be using a behavior economic lens to analysis this after being inspired by Pete who recently wrote an article on his decisions to choose between Cashback or Airmiles.

Will you choose “up to 2% of cashback” or “up to 4% of airmiles”?

Cashback or Airmiles

Cashback or Airmiles: I miss travelling

To answer the above question, I have to remodel the question so that we can use a behavior economic theory to answer it. These are the following assumptions that I will be taking.

Assumptions

  • I will assume that Pete receive the full 2% and 4% (noted there might be conditions to get up to the intended rates)
  • I will assume that Pete receive $200 and $400 (in monetary form)
  • The probability of using the cashback is 100% (you will definitely be able to use the money)
  • The probability of using the airmiles is xx% (airmiles might be devalued/you can’t fly/points expire etc)
  • The traveler is paying the airfare out of their own pocket. (Thank you Philip Walsh for your contribution)
  • I recognize that airmiles are a specific spend in the travel category but will be treating it as if it is equal to cash

 

Which will you choose? 100% of getting $200 or xx% of getting $400?

One common way to approach this problem is using the concept of expected returns. In this case, if there is a chance of getting more more an 50% of getting $400, it is logical sense to go for the latter option. However, emotionally we might not feel the same.

In my previous sharing on Self Care and Wealth Management, I wrote about emotions being part of our decision making process and it is the same in this case. The behavior economic concept that I would be sharing with you is the certainty effect.

 

The Certainty Effect

Behavior Economist Dr. Daniel Kahneman propose a concept called the Fourfold Pattern. 

Cashback or Airmiles Fourfold Pattern

Cashback or Airmiles Fourfold Pattern

While we are not going to go through all four patterns, the behavior pattern that I would illustrate today’s case is in the top left section. These are the choices.

Choice #1: 95% of winning $10,000
Choice #2: 100% of winning $9,000

Clearly, choice #1 is ideal because the expected payout is $9,500. However, most people will choose choice #2 because the emotion called fear of disappointment. They rather “lock in” the profits in a high probability scenario. In certainty, most people are risk adverse.

 

The Final Verdict

In a real life scenario, we are unable to set controls in our experiment but we can draw inference from the certainty effect.

Choice #1: 100% of $200
Choice #2: xx% of $400

I believe most people will choose choice #1 because they are motivated by the fear of disappointment. There are too many uncertainty such as airmiles depreciation, airtravel resumption and expiry of points with choice #2. That being said, airmiles are can only be used in a specific category while cash will.. be cash.

I recognise that there will be some that will continue to choose choice #2 and may be motivated by other behaviour emotions.

How about you? What choice will you make?

 

No one will care about your money as much as you do.

In Wealth Management, it is important to Pay yourself first. Beware of scams. Before you invest in any company or popular investment opportunity, be sure to do your own due diligence. If you wish to learn more about investment, I hope to nurture genuine relationships with all of my readers.

Please feel free to contact me on my Instagram (@chengkokoh) or Facebook Page or my Telegram Channel! Or subscribe to our newsletter now!