Credit Cards

Understanding Caps on Monthly Rewards Earnings

Get the Best Credit Cards in Singapore

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One of the biggest perks of having a credit card is the rewards you can earn from your spend. Whether you're looking to earn miles, points or cashback, there's likely a card tailored to your needs. However, there's more to a card than just rewards rates and annual fees. In order to truly determine the maximum value of a card, it's essential to understand how monthly earnings caps work.

Table of Contents:

What is a Monthly Rewards Cap?

Rewards credit cards typically offer cashback, points or miles to cardholders for their spend–however, this potential to earn is rarely infinite. In fact, the majority of credit cards impose a monthly limit, or cap on earnings, which restricts how much cardholders can earn within that time period. Earnings caps are most common with cashback or rebate cards, most likely due to their high rewards rates. Points-earning shopper cards also tend to have limits, though miles-earning cards stand out for rarely instating caps.

It's worth mentioning that consumers can still earn rewards, even after reaching an earnings cap. The cap simply limits earnings at higher advertised rates. Once the cap is met, additional spend earns the base rate, typically 0.3% cashback.

Trade-Off Between Rewards Rates and Cap Sizes

Rewards rates and earnings caps go hand in hand. Credit cards with high rates typically have lower earning caps, and those with lower rates have higher caps (or no cap at all). The reason for this comes down to total rewards output. If a consumer earns 10% cashback, they'll accrue rewards very rapidly. In fact, spending S$2,000/month for a year at this rate would earn S$2,400 in rewards–a spectacular amount. Because this is unsustainable for a bank to provide, an earnings cap is implemented to keep consumers' earnings in check. For example, a consumer may be able to earn 10% cashback, but only up to S$25/month.

Example of Trade-Offs Between Rewards Rate & Cap Size

Credit CardRewards RateMonthly CapSpend to Max CapMax Earnings/Yr
MB Family & Friends8.0%S$80S$1,000.00S$960
UOB One5.0%S$100S$2,000.00S$1,200
HSBC Advance3.5%S$125S$3,571.43S$1,500
Rates displayed for HSBC Advance assume cardholders are Advance customers. Rates and calculations assume that all spend is in rewards-eligible categories and all other criteria, such as minimum spend requirements, are met

Typically, the higher the advertised rewards rate the lower the cap, and vice versa (it's harder to earn when rates are low, so there's less risk in establishing a large cap).

Who Benefits Most from Cards Without Earnings Caps

Some cashback credit cards do not have earnings caps. It's no surprise, however, that these cards have some of the lowest rebate rates on the market. Typically, unlimited cashback cards offer 1%–2% rebates on all spend, without distinct categories. This is great for people who don't want to track vendors or type of spend.

Nonetheless, such cards are not the best fit for the majority of consumers. To the contrary, low rates paired with no limits on earnings uniquely favor the very wealthiest individuals. This is because with current cards, it takes S$7,000+/month in spend to earn enough to eclipse the market's highest earnings caps. People who can reliably spend this much every month will earn more than possible with other limited cards. However, people with lower spend would be far better off with a capped mainstream card.

Example: High Spend is Required to Make Limitless Cards Competitive

Monthly SpendUOB One CardHSBC Advance CardSC Unlimited Cashback Card
S$2,000S$100 (cap)S$70S$30
S$7,000S$100 (cap)S$125 (cap)S$105
S$9,000S$100 (cap)S$125 (cap)S$135
HSBC Advance Card rates as applied to HSBC Advance banking customers

What Role Rewards Caps Should Play in Credit Card Selection

If you're looking for a credit card, a ballpark way to approximate the card's total earning potential is to divide the rewards cap by the cashback rate. This will give you a general idea of how much you'd need to spend to earn the maximum rebate. You can try this across multiple cards and compare. While many credit cards reward different spend categories (groceries, dining, transport etc.) with different rates, consider which category you're most likely to spend in, or run quick calculations for each. While these numbers may not be exact, they'll give you a basic understanding of how credit cards may differ when looking beyond their advertised rates. Ultimately, understanding earnings caps is key to making an informed decision, and should be paired with other considerations such as annual fee, minimum spend requirement and more.

Carrie Arndt

Carrie is a Senior Analyst at ValueChampion, specialising in credit cards in Singapore. She previously led consumer studies worldwide as a Senior Research Executive at MMR Research.

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