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Illusion of Miles Hacking: How Young Adults are ‘Influenced’ into Debt

In recent years, the allure of miles hacking has captivated many young adults, promising the dream of luxury travel on a budget. Influencers and finance content creators often glorify this strategy, showcasing their glamorous lifestyles funded through seemingly savvy use of credit card points. However, this trend is increasingly leading young people into significant credit card debt, overshadowing the reality of their financial situation.

The Reality Behind Miles Hacking

Miles hacking, at its core, involves strategically using credit cards to earn points or miles that can be redeemed for travel perks. While it sounds appealing, the practical application of this strategy is far more complex and often unrealistic for the average young adult.

Take, for instance, a popular finance content creator who recently shared her miles hacking strategy, recommending her miles hacking stack which involves the use of five different credit cards. On the surface, this might seem like a savvy move, but let’s break down the reality:

  1. Credit Card Caps: Most credit cards have a cap on the amount of spending that can earn points, often around $1,000 per month. The influencer herself mentioned, “My Citi Rewards card has a cap at $1,000, which is my first catch-all card.” Following that, she listed cards such as the HSBC Revolution, DBS Women’s World Mastercard, and UOB Preferred Platinum Visa.
  2. Median Income Constraints: With the median income for young adults in Singapore being approximately $5,500, after CPF contributions, the take-home pay is around $4,000.
  3. Budgeting Realities: According to the 50/30/20 budgeting rule, an individual should ideally spend only 50% of their income on needs, 30% on wants, and 20% on savings. This means a young adult earning $4,000 should limit their discretionary spending to around $2,000.
The Reality Behind Miles Hacking

Given these constraints, the need for multiple credit cards becomes questionable. Unless one has significant expenses such as housing or renovation, the average young adult’s spending does not necessitate five different credit cards. In fact, having just one or two well-chosen cards should be more than sufficient to manage everyday expenses while earning some rewards.

My credit card stack is rather simple – the basic pairing of Citi Rewards + Amaze which gives me 4mpd with a cap of $1,000 and the rest of my balance in UOB One which gives me cash back and passive interest by pairing with the saving account.

The Dangers of Unrealistic Financial Advice

The issue with influencers promoting extensive miles hacking strategies is twofold:

  1. Unrealistic Standards: These influencers often set unrealistic standards, making it seem like multiple credit cards and constant spending are necessary to achieve a rewarding lifestyle. This can pressure young adults to overspend in an attempt to keep up with these influencers.
  2. Affiliate Marketing: Many influencers earn commissions through affiliate marketing when their followers sign up for credit cards using their links. This creates a conflict of interest where the influencer’s primary goal may be to earn commissions rather than provide sound financial advice.

The Consequence: Rising Credit Card Debt

As highlighted by recent reports, more Singaporean youths are grappling with loan and credit card debt. The pressure to conform to unrealistic financial strategies promoted by influencers is a significant contributing factor. Young adults, enticed by the promise of miles and rewards, may find themselves overspending and accumulating debt that they struggle to repay.

A More Realistic Approach

To avoid falling into the debt trap, young adults should approach credit cards with caution:

  1. Limit the Number of Cards: Stick to one or two credit cards that offer the best rewards for your spending habits.
  2. Budget Wisely: Follow the 50/30/20 rule to ensure you are not overspending and are able to save for the future. I do have to mention that the 50/30/20 budgeting rule may be unrealistic especially if you are earning a lot more. Just imagine spending $5,000 on an income of $10,000 which is quite excessive unless you have big purchases eg. renovation.
  3. Avoid Impulse Purchases: Only use credit cards for planned expenses and pay off the balance in full each month to avoid interest charges.

By adopting a realistic and disciplined approach to credit card use, young adults can enjoy the benefits of miles and rewards without the burden of debt. It is crucial to prioritize financial health over the allure of influencer-promoted strategies that may not align with one’s personal financial situation.

As someone navigating the financial landscape myself, I find it ridiculous how influencers like the one mentioned push unrealistic standards. She casually advised viewers to juggle multiple cards: “First, the Citi Rewards card, followed by the HSBC Revolution, then the DBS Women’s World Mastercard, and lastly the UOB Preferred Platinum Visa.” This might sound strategic, but in reality, it sets up many young adults for failure. Financial prudence should always trump the flashy allure of miles and points. But of course, these are just my two cents, that influencer could very well be having a lot of big purchases coupled along with high income which allows for that sort of spending.

Eugene Chai

With five years of financial experience (and maybe a few too many all-nighters fueled by cold brew and craft beer), Eugene tackles complex financial concepts and breaks them down for young adults. Featured on Investment sites and CNA's Money Talks, this self-proclaimed "Finance Whisperer" isn't your stuffy suit. He uses relatable narratives (think "adulting, but make it money") to turn numbers into your financial BFFs, guiding you towards smart choices with your hard-earned dough.

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