I recently crunched some numbers on credit card reward points — and honestly, the results made me question if they’re really worth the hype.
Take this example: I used to buy Amazon Pay gift cards through the SmartBuy portal using my DBC card to pay my electricity bills. DBC gives 3X reward points on such spends, which looks like a sweet 9.99% return.
But then you factor in the 3.5% processing fee + GST on the Gyftr portal, and that effective return drops to around 5.8%.
Still seems decent, right? But here’s where it gets tricky — that 5.8% is not actual cashback, it’s in the form of reward points. I usually use those points for flight bookings, where DBC offers 5X rewards again. Sounds like a loop of free gains? Not quite.
When booking flights, you only earn reward points on the actual amount paid — that is, the total amount minus any reward points you use. So, your effective return on the new transaction gets reduced.
Now, some might argue: “Well, you’re still paying less, so it’s a win.” But I’ve already associated those reward points with my previous transaction — so at this point, RP is just like my money. And when I use it, I’m not only reducing the value of future rewards but also spending something I partially paid to earn (thanks to that 3.5% fee).
This cycle keeps repeating, and with every transaction, the true value of those points keeps shrinking.
Moral of the story: reward points look shiny on the surface, but dig a little deeper, and you’ll see the value isn’t quite what it seems.
Take this example: I used to buy Amazon Pay gift cards through the SmartBuy portal using my DBC card to pay my electricity bills. DBC gives 3X reward points on such spends, which looks like a sweet 9.99% return.
But then you factor in the 3.5% processing fee + GST on the Gyftr portal, and that effective return drops to around 5.8%.
Still seems decent, right? But here’s where it gets tricky — that 5.8% is not actual cashback, it’s in the form of reward points. I usually use those points for flight bookings, where DBC offers 5X rewards again. Sounds like a loop of free gains? Not quite.
When booking flights, you only earn reward points on the actual amount paid — that is, the total amount minus any reward points you use. So, your effective return on the new transaction gets reduced.
Now, some might argue: “Well, you’re still paying less, so it’s a win.” But I’ve already associated those reward points with my previous transaction — so at this point, RP is just like my money. And when I use it, I’m not only reducing the value of future rewards but also spending something I partially paid to earn (thanks to that 3.5% fee).
This cycle keeps repeating, and with every transaction, the true value of those points keeps shrinking.
Moral of the story: reward points look shiny on the surface, but dig a little deeper, and you’ll see the value isn’t quite what it seems.
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