Credit score Card Rewards in Singapore Are Getting Worse

Methodology

We continually monitor the bank card house in Singapore and have been gathering information on bank cards and their rewards. For this particular examine, we sampled 51 of the preferred bank cards from the entire main card issuers and in contrast their present rewards program in 2017 to what they had been in 2016.

To calculate how a lot worth a card can generate for a mean client, we created a hypothetical client whose spending behavior is much like the Singaporean common in accordance with the federal government’s expenditure survey. By modelling every card with this hypothetical particular person, we had been in a position to calculate the worth of rewards (i.e. cashback and air miles) that one may earn over 2 and three years, whereas additionally adjusting for the impression of annual charges.

Of notice, we’ve excluded some one-off and promotional perks like x% off at a choose variety of eating places or retailers, and many others functions of evaluating direct advantages of every bank cards. As these advantages are continually altering and might be typically too complicated for shoppers to make use of, we deemed them to be much less influential in a bank card person’s economics. We additionally solely thought-about a card to have modified if its greenback worth (by way of money rebate and air miles an individual can earn over 2-3 years) elevated or decreased by at the very least S$100.

Key Findings: Credit score Card Rewards Are Declining

For a mean client with a month-to-month expenditure of S$2,000, we discovered that 2-year greenback worth of playing cards has declined by about S$34 on common. 3-12 months greenback values have declined by about S$55 on common. These figures really under-represent the magnitude of this pattern that we’ve seen.

For example, some banks have launched welcome bonus promotions that briefly improve these common figures. When most of those applications expire on the finish of February and March, the common decline will improve meaningfully, particularly for 3-year or longer time frames the place these “one-time” boosts begin to matter a lot much less.

Largely, we’ve been noticing some playing cards had modified their set of rewards over the previous couple of months, whereas some have additionally raised their annual charges. In complete, we discovered that 7 bank cards out of 51 (or 14%) turned considerably worse for shoppers, whereas only one turned meaningfully higher. Let’s talk about every consider element one after the other.

Change in Reward Program

About 8% of the 51 bank cards we sampled in Singapore have lowered their rewards charges by a big quantity in comparison with 2016. These playing cards had been: OCBC Titanium, ANZ Platinum Visa Card, ANZ Swap Platinum Card and POSB On a regular basis Card. By both altering the rewards price or altering reward classes, they ended up offering much less by way of both air miles or money rebate to the cardboard holder.

For example, the POSB On a regular basis card deprived its customers by shifting advantages from a excessive spending class to a low spending class. Beforehand, the POSB On a regular basis card provided as much as 9% of cashback for eating bills, however now decreased this rebate price to 0.3% whereas shifting the advantages to abroad spending, which elevated from 0.3% to five%. Whereas this variation could appear “truthful” on the floor, that is much less useful to the common client who would solely journey a couple of times a yr.

Equally, OCBC Titanium card utterly modified its set of rewards to deal with procuring. By providing 4 miles per S$1 spent on procuring, it seeks to enchantment to energetic buyers. Nevertheless, that is additionally disadvantageous to the common client as a result of all one other spending solely earns 0.4 miles, whereas it used to earn 1 mile per S$1 earlier than the cardboard’s rebranding. Two ANZ playing cards talked about above had a comparatively less complicated change, as they eliminated the 2-20x rewards level buff for classes like petrol, journey, leisure and groceries.

Annual Charge Enhance

When it comes to annual charges, we noticed a complete of three playing cards that elevated the price of utilizing them for the patron. Two playing cards did this by straight growing the annual charge quantity: UOB OneCard and OCBC Plus! Visa bank card. UOB One card, which returns as much as 5% of flat price money again on each greenback you spend, used to cost solely S$128.4 of an annual charge, which was waived for the first yr.

Whereas the waiver nonetheless exists, now the annual charge elevated to S$192.6, a whopping 50% improve. OCBC Plus! Card elevated its charge from S$80 to S$107. One remaining card, OCBC Robinson Card, simply removed their charge waiver applications, which successfully will increase the price of utilizing this card by S$192.6 over 2 to three years. Excessive annual charges offset the good thing about their rewards applications in a significant approach and should encourage some shoppers to alter to a distinct card.

Moreover these, a number of playing cards have additionally elevated the minimal necessities for qualifying for annual charge waivers, like OCBC’s Frank and 365 playing cards. Nevertheless, their necessities are nonetheless comparatively lenient as they solely require one to spend S$10,000 on the cardboard per yr.

Playing cards That Improved

There was one card that improved in a big approach in Singapore: Maybank Horizon card. Beforehand named Maybank Horizon Platinum Visa Card, it was rebranded right into a significantly better Maybank Horizon Signature Visa card. That is the way it modified. In 2016, Maybank Horizon card used to supply 2 miles for S$1 spent on petrol, journey, procuring and utility-related bills, with 0.4 miles awarded for S$1 spent on all the pieces else.

Now, it awards 3.2 miles for S$1 spent on petrol and eating, and one other 2 to three.2 miles for travel-related bills. For all different bills, it nonetheless offers 0.4 miles per S$1. Whereas they raised the annual charge from S$150 to S$180, they nonetheless waive this annual charge so long as you spend S$18,000 per yr (beforehand S$12,000 per yr), which means you solely need to spend S$1,500 on the cardboard per thirty days. General, we expect this card improved in greenback worth by S$164 over 2 years.

Another playing cards additionally improved, however in a lot much less important methods. For example, DBS is offering S$160 money rebate for brand new prospects till 31 March 2017, up from S$100 rebate they used to present in 2016. UOB is operating an identical program of S$50 rebate for brand new prospects till 31 March 2017.

Nevertheless, these “bonuses” are simply up-front incentives which have much less impression on the long-term utility of a bank card. Not solely that, within the occasion that banks roll again these incentives, their playing cards may have no enchancment over their choices from 2016.

Potential Causes

From an analyst viewpoint, this can be a basic approach of controlling price. Historically, the banking enterprise fashions have all the time been about controlling prices & gaining scale as a result of their merchandise are comparatively much less differentiated than different client merchandise like trend items. In reality, there was a pattern in direction of price discount for banks in Singapore currently.

In keeping with Straits Instances, Citibank simply raised the minimal complete relationship stability for patrons. Servicing an account has a variety of price gadgets related to it, like customer support, compliance, authorized, and many others. If a buyer’s account is just too small, it may not be value a financial institution’s time to service it.

That’s why they’re elevating each the account service charge (from S$10 to S$15) and the minimal complete relationship stability wanted to get the account service charge waiver (web page 4 of this doc). There was an identical improvement within the US after Dodd-Frank elevated compliance price for banks, and banks needed to increase the minimal stability.

A attainable purpose for these strikes is that banks are both feeling margin pressures or are feeling safer about their aggressive atmosphere. What we do know is that we’ve additionally been noticing some decline in client advantages on bank cards in Singapore in the previous couple of months, i.e. increased annual charges for major or secondary holders, rising APRs charged on playing cards, and declining general advantages in types of money again, air miles or welcome bonuses.