It pays to time your sign-ups

Go for new bank products early or bide one's time to sign up? Experts weigh in

Sometimes it pays to jump in when new banking products like credit cards or savings accounts are first released in the market, as you can reap the rewards before terms and conditions change.

Other times, it pays to wait as promotions come in cycles. If the time is right for you, go ahead as you never know when the fine print might change.

But it is hard to chase freebies that pop up only once in a while and a hassle to switch banks, so experts recommend finding the best product that suits your needs.

FIRST IN CAN BE BEST SERVED

As a general rule, it can pay to be an early adopter, says Mr Aaron Wong, founder of The MileLion, a website analysing frequent flier and miles credit card programmes.

"But if you've missed the first wave, waiting for a 'revival' of a product might not be a bad strategy, too. Of course you have no way of knowing when or if it'll happen, and such things can be unpredictable," he adds, saying he thinks about sign-up bonuses like a cycle.

"When a bank launches a new credit card or bank account, the name of the game is customer acquisition. So you can expect a big push for new customers with every big product launch, complete with corresponding sign-up bonuses."

He cites the HSBC Advance card as a recent example. It used to be "the best card for earning miles in Singapore, if you spend a lot on dining and online. Then they changed the terms and conditions in May and turned it into a cashback card".

Mr Wong notes that the card offered four miles per dollar on dining and online spending with no cap, "which was pretty much unheard of". The only catch was that consumers had to open an HSBC Advance account and deposit $30,000, or $2,500 each month for a year.

ATTRACTING NEW CUSTOMERS

When a bank launches a new credit card or bank account, the name of the game is customer acquisition. So you can expect a big push for new customers with every big product launch, complete with corresponding sign-up bonuses.

MR AARON WONG, founder of The MileLion, a website analysing frequent flier and miles credit card programmes, on what happens when a bank launches a product. 

Mr Wong says: "I cancelled the card because this was a fundamental change for me - going from a miles proposition to a cashback one.

"There was sackcloth and ashes online about this, but hey, I got 600,000 miles over the one year I had an HSBC Advance card, simply by parking all my dining and online spending with them. That's as good a run as any."

He also noted how the Krisflyer Ascend card used to have a good sign-up deal when it first came out in 2013: A voucher for a free night at any property in the Millennium Hotels chain, four lounge passes with 5,000 bonus miles with the first purchase of any amount, and a waiver of the first year's annual fee.

Last year, he noticed how much harder it was for people to use the voucher, how the annual fee was higher, and how there were no more waivers.

Mr Vinod Nair, chief executive of personal finance comparison site MoneySmart.sg, says the OCBC Bank's 360 account is the best example of how banks typically offer the most generous benefits and rewards to early adopters.

"When that account was first introduced in 2014, it was way better than the competition. Even after they changed the terms and conditions in 2015, it was still arguably the best savings account," he adds.

However, Mr Nair recommends that one should always go for a product that best fits one's lifestyle, and not just maximise benefits for the sake of it. "For example, while the 360 account initially rewarded salary crediting, credit card spending and bill payment, the key factor was ensuring that your account balance was as high as possible to maximise the interest earned - but only up to the cap, of course. The initial cap was at $50,000."

That has become more tricky with recent changes, like one where a 0.5 per cent payment bonus - when at least three bills are paid online or through Giro - was changed to 0.3 per cent for account holders. Also, overall bill payment has to be at least $150, a criterion that was absent before.

He notes other examples where it paid to be an early adopter, such as DBS' Live Fresh card, which had a five-year annual fee waiver when it was first introduced, or the Standard Chartered's Manhattan card and OCBC's Frank card - "both popular cashback cards when they first came out".

WHEN IT PAYS TO WAIT INSTEAD

MoneySmart.sg's Mr Nair says banks are realising the value of new-to-bank customers. "One particular condition that has become popular in the past year is that only new-to-bank or new-to-cards customers benefit," he adds.

"If you have cancelled a credit card within the past 12 months, you will not be eligible for the sign-up gift should you apply for it again. Early adopters would lose out on the very generous sign-up promotions and gifts given to new-to-bank customers."

GOODIES FOR NEW CUSTOMERS

If you have cancelled a credit card within the past 12 months, you will not be eligible for the sign-up gift should you apply for it again. Early adopters would lose out on the very generous sign-up promotions and gifts given to new-to-bank customers.

MR VINOD NAIR, chief executive of personal finance comparison site MoneySmart.sg, on banks realising the value of new-to-bank customers.

The MileLion's Mr Wong cited Citi's PremierMiles Visa, which has been here since 2007, as an example. It had a sign-up offer last year of 42,000 miles, among other perks. However, "given how generous the sign-up bonus was, it wasn't surprising that Citibank limited who could take part. If you were already holding a Citibank card, or had owned a card within the past 12 months, you couldn't take part".

It is also hard to predict such "mid-cycle rejuvenations", where banks will get an inflow of sign-ups at a big acquisition cost, he says.

DBS Bank says it runs promotions across both its existing base, as well as new acquisitions for cards. Others do, too, like UOB's promotion now for the first 600 existing card members who sign up for a new credit card and spend $300. They can get a $20 cash credit.

However, DBS head of cards and unsecured loans Anthony Seow notes what customers should do: "When signing up for any new credit card, they should select products that best meet their needs and purchasing preferences, rather than select one based purely on sign-up gifts."

Mr Duckju Kang, analyst at personal finance adviser ValuePenguin, says two factors - how much money you tend to spend per month, and where your expenditure is concentrated, like dining or shopping - affect how well you benefit from a particular card, much more than the sign-on bonuses.

He looks at the HSBC Advance card from a different angle. It offers a 3.5 per cent flat-rate cash rebate for those who spend more than $2,000 a month.

Mr Kang says if you own a card like UOB One Card that provides up to 5 per cent cash rebate per month for those who spend at least $2,000 monthly, and want to get the HSBC card, check how much money you actually spend each month.

He explains that the UOB card's rebate is capped at $100 per month while the HSBC card's rebate is capped at $125. So the UOB card works better for people who spend less than $2,850 per month, while the HSBC card tends to be for those who spend more than that.

HOW TO HANDLE SIGN-UP BONUSES AND PERKS

Analysts agree that it's not smart to sign up for cards just for freebies and then cancel them in the hope of catching the next promotion, as banks have become stricter on consumers doing that.

The MileLion's Mr Wong says its "technically possible, just difficult to do in practice and requires a lot of micromanagement".

Mr Kang notes that bonuses often are not big enough to offset the potential opportunity cost that they create. He cites a difference of $300 in total rebate earned over two years between the UOB and HSBC cards mentioned earlier, adding that "a typical cash bonus of $180 isn't big enough to offset this kind of difference".

MoneySmart.sg's Mr Nair notes that when it comes to playing the air miles game, some people may feel that applying for cards just to earn sign-up bonuses is worthwhile, since air mile sign-up bonuses are often generous.

Some cards lure you with miles or vouchers, among other perks, so think about your strategy.

Mr Wong notes: "If you're the sort who does mainly regional travel to destinations served by budget carriers, you might not get too much value out of pursuing miles. (For)... comfortable long- haul travel though, you'll, of course, find miles more attractive.

"I use a heuristic (rule or method) of valuing one mile at two cents when evaluating trade-offs, although it's not always a straightforward mathematical calculation."

He says it does not have to be an "either/or" thing when it comes to bonuses or perks, so look around for a good deal. "We're seeing financial comparison sites, like GoBear or SingSaver, springing up in Singapore. These sites typically offer you some bonus gift on top of whatever the bank is offering when you sign up," says Mr Wong.

"For instance, if you were to sign up for a Citi PremierMiles card through GoBear, you'd get the sign-up bonus that Citibank is offering plus an $80 Sephora gift card."

Mr Nair adds: "What we've been seeing recently is that banks are becoming less willing to commit to long-term product benefits, and may revamp entire products in order to stay relevant."

Unlike telcos, which tend to honour old plans for loyal customers, banks do not extend such options to consumers, Mr Nair says. He is not keen when products, like the 360 account, change, as it affects trust.

Mr Wong adds that banks are strong believers in the principle of inertia: "Each change is annoying but not necessarily a deal breaker.

"In a way it's clever, because fickle customers are usually the least profitable for a bank. I highly doubt the bank wants to retain a customer who signs up just for the bonus and then uses the card sparingly after that."

In the end, banks can and will change the terms and conditions when it is time to do so. Do not let inertia rule and do your homework.

A version of this article appeared in the print edition of The Sunday Times on July 30, 2017, with the headline 'It pays to time your sign-ups'. Print Edition | Subscribe