In the ever-competitive market of enticing cashback credit cards it can be hard for borrowers to make the right choice. Cashback credit cards — which allow you to earn cash rewards for making purchases — differ according to the credit-card company. Some offer the same rate of return for various types of purchases throughout the year; some cards offer a higher cashback percentage with increased usage; others offer a higher cashback percentage at select merchants or for particular types of purchases. Meanwhile, revolving credit cards work on a quarterly bonus system.
So, which to choose? Waleed Barhaji, Business Head of Consumer Finance at Noor Bank, says when choosing a cashback credit card it is prudent to consider all aspects for a credit-card offering.
Rewards vs caps
“Within cashback, you ought to consider the percentage of the cashback — whether there is an associated value (dirham) cap on what you could earn and what categories the cashback applies to,” he explains.
“Beyond cashback, you should consider annual fees, other lifestyle benefits such as free gym access, free valet services, etc., and the interest/profit rate charged on the card.
“Several cards offer cashback rewards that are confined to a particular spend category. A 2 per cent
cashback on all spends will probably offer you more value than a card that offers 10 per cent cashback on dining out only.”
Barhaji says that with the UAE being a very competitive market, there are numerous offers for cashback credit cards. “These range from spend category-specific programmes to open-ended ones that offer a certain percent of cashback on all purchases,” he adds. “There are also offers where the percentage of cashback varies depending on the amount spent every month — a higher spend amount attracts higher cashback.
“You must also consider the fact that the cashback is probably one of the features in a broader credit-card proposition.”
Barhaji says a top tip when choosing a cashback credit card is to not be fooled into choosing a card based on a headline cashback rate. “There are at least two important factors you should consider,” he explains. “First, how do you get to the headline cashback rate? Is it for a particular type of spend category, or on all spends? Is there a minimum qualifying spend amount required to be eligible for the headline rate?
“What is the monthly maximum dirham value cap? If there is a tight cap, then the effective cashback that you earn may be significantly lower than the headline rate.”
Diana Jarmalaite, Research Analyst at Euromonitor International, advises consumers to do their homework before choosing a cashback credit card. “The most credit cards give is an access to the certain rewards systems, which for instance might be cashback on every purchase or provide the opportunity to collect miles,” she says. “The key areas to look would be the payments related to the card issued and service and general profile of rewards.”
Cashback credit cards also might vary for different consumers. “The majority of the credit cards have minimum requirements for applicants as well as different offerings related to the customer credit history as well as income level,” she says.
Currently, the market offers a huge variety of cashback credit cards and consumers can be faced with an abundance of choice. “Co-branded cards such as Dnata or Najm can give an access to airport lounges or offer extra rewards for shopping within the group’s stores,” she says. “This would be a valuable point while considering the cashback credit cards.”
Partnerships
Eyad Al Kourdi, Senior Vice-President and General Manager for the UAE, MasterCard, says a large percentage of cards in the UAE have cashback features. Such cards, he says, are expected to continue growing in popularity given the flexibility and wide range of redemption opportunities they offer cardholders.
“Each bank offers consumers unique products and solutions to meet market needs and, ultimately, cardholders should choose offers that are best suited to their unique requirements,” says Al Kourdi.
“Cashback credit cards can offer significant savings at hundreds of partner outlets spanning a range of categories including supermarkets, fashion and travel. Some banks, in partnership with MasterCard, offer cashback on education fees, utility bills, supermarket purchases and more.”
Al Kourdi says the cashback feature usually falls into one of three categories: generic programmes where customers earn points and then use those points to make purchases at selected merchants; programmes in partnership with airlines where customers earn air miles during their purchases; or direct cashback programmes, where a percentage of the total amount of money spent on the card is automatically credited to the customer’s account.
“The last option appeals to a wider range of consumers due to the flexibility of being rewarded with cash, which can then be spent anywhere,” he says.
