Credit score Card Rewards in Singapore Are Getting Worse

Methodology

We continually monitor the bank card area in Singapore and have been amassing information on bank cards and their rewards. For this particular research, 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 shopper, we created a hypothetical shopper whose spending behavior is much like the Singaporean common in response to the federal government’s expenditure survey. By modelling every card with this hypothetical individual, we had been in a position to calculate the worth of rewards (i.e. cashback and air miles) that one might 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 so on functions of evaluating direct advantages of every bank cards. As these advantages are continually altering and could be usually 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 of a card to have modified if its greenback worth (when it comes to money rebate and air miles an individual can earn over 2-3 years) elevated or decreased by no less than S$100.

Key Findings: Credit score Card Rewards Are Declining

For a mean shopper 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-Yr greenback values have declined by about S$55 on common. These figures really under-represent the magnitude of this development that we’ve seen.

As an example, some banks have launched welcome bonus promotions that quickly enhance these common figures. When most of those packages expire on the finish of February and March, the common decline will enhance 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 few months, whereas some have additionally raised their annual charges. In whole, we discovered that 7 bank cards out of 51 (or 14%) turned considerably worse for shoppers, whereas just 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 major 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 when it comes to both air miles or money rebate to the cardboard holder.

As an 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 supplied 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 modification could appear “honest” on the floor, that is much less useful to the common shopper who would solely journey a few times a 12 months.

Equally, OCBC Titanium card utterly modified its set of rewards to give attention to buying. By providing 4 miles per S$1 spent on buying, it seeks to attraction to energetic buyers. Nonetheless, that is additionally disadvantageous to the common shopper 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 easier change, as they eliminated the 2-20x rewards level buff for classes like petrol, journey, leisure and groceries.

Annual Price Enhance

By way of 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 instantly rising 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 12 months.

Whereas the waiver nonetheless exists, now the annual charge elevated to S$192.6, a whopping 50% enhance. OCBC Plus! Card elevated its charge from S$80 to S$107. One remaining card, OCBC Robinson Card, simply removed their charge waiver packages, 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 packages in a significant manner 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. Nonetheless, their necessities are nonetheless comparatively lenient as they solely require one to spend S$10,000 on the cardboard per 12 months.

Playing cards That Improved

There was one card that improved in a major manner 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, buying and utility-related bills, with 0.4 miles awarded for S$1 spent on every thing 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 supplies 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 12 months (beforehand S$12,000 per 12 months), which means you solely need to spend S$1,500 on the cardboard per thirty days. General, we predict 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. As an example, DBS is offering S$160 money rebate for brand spanking new clients 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 spanking new clients till 31 March 2017.

Nonetheless, 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 could have no enchancment over their choices from 2016.

Doable Causes

From an analyst perspective, it is a basic manner 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 shopper merchandise like trend items. Actually, there was a development in direction of price discount for banks in Singapore currently.

In accordance with Straits Occasions, Citibank simply raised the minimal whole relationship steadiness for purchasers. Servicing an account has quite a lot of price gadgets related to it, like customer support, compliance, authorized, and so on. If a buyer’s account is simply too small, it won’t 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 whole relationship steadiness wanted to get the account service charge waiver (web page 4 of this doc). There was an identical growth within the US after Dodd-Frank elevated compliance price for banks, and banks needed to elevate the minimal steadiness.

A potential 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 shopper advantages on bank cards in Singapore in the previous few months, i.e. larger annual charges for main or secondary holders, rising APRs charged on playing cards, and declining total advantages in types of money again, air miles or welcome bonuses.