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Saturday, February 22, 2014

Why You Should Not Overlook Cashback Cards

Let me give two examples of cards with cash back.
UOB Bank One Card Visa
[1] Petrol: 5% (All petrol stations)
[2] Cinema: 5% (Golden Screen Cinemas)
[3] Groceries: 2% (Tesco, Aeon Big, Giant, Cold Storage & Jaya Grocer)
[4] Pharmaceutical: 2% (Guardian, Watson & Caring Pharmacy)
[5] Telecommunications: 2% (Maxis, Digi & Celcom)
[6] 0.3% for all other purchases not listed above.
[7] Cash back is capped at RM30 for petrol, RM30 for groceries and RM6 for mobile.
[8] Additional SMART$ rebate 5% for GSC and 2% BHPetrol. Other merchants as well not listed here.
This is simply amazing because all are common merchants. Unfortunately it is not as accessible requiring an annual income of at least RM36000 to be eligible for this card.

OCBC Bank Titanium MasterCard
[1] 1% rebate on all retail spending.
[2] No caps on rebates.
Unknown to many the word 'retail' here is misleading. It actually encompasses absolutely any type of spending, be it on their online retail therapy or buying groceries at the local supermarket.
This card is also is surprisingly accessible. Anyone aged 21 years old and above with an annual income of at least RM24000 can apply for this card.

So how much can you actually save per month? Let me give you an example:
-->Take advantage of UOB card on selective merchants.
RM250 petrol @ BHP: RM250 x 5% = RM12.50 (smart$: RM250 x 2% = RM5.00)
RM100 movies & popcorn @ GSC: RM100 x 5% = RM5.00 (smart$: RM100 x 5% = RM5.00)
RM88 telecomm with Digi: RM88 x 2% = RM1.75
RM200 groceries @ Tesco: RM200 x 2% = RM4.00
-->Use OCBC card for your remaining recurrent expenses
RM400 insurance: RM400 x 1% = RM4.00
RM140 broadband with Streamyx: RM140 x 1% = RM1.40
RM400 meal joints that accept credit cards: RM400 x 1% = RM4.00

In total it's all RM32.65 in cash back rebate & RM10 (smart$ rebate).
How much is that per year? RM511.80

RM500 may not seem much but never underestimate the power of compounding. If you had dump this RM500 every year for 5 years when you are 25-30 years old this is what will turn out in 30 years (60 years old):

Your RM2500 will turn into this:
Fixed Deposit (3% p.a.): RM5860 (more than double)
Bond Fund (5% p.a.): RM10206 (quadruple)
Mixed Asset Conservative Fund (7% p.a.): RM17600 (x7)
Mixed Asset Balanced Fund (8.5% p.a.): RM26318 (x10)
Equity Fund (10% p.a.): RM39146 (x16)
*You followed Aboi's Diversified Portfolio (12% p.a.): RM65940 (x26)
*Know how to switch equity funds / targeted fundamentally sound stock (15% p.a.): RM141800 (x56)
*Possible but you have to be damn good: (18% p.a.): RM299234 (x120)
*Somehow you are so gung hu (20% p.a.): RM487390 (x194)

All from using cash back cards and setting aside RM42.65 per month (offset from rebate savings -> investment fund). SIMPLE OR NOT?

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