Credit card- An super exciting way to spend now and pay later concept introduced in India in early 1980. At present this credit service was available for those who got a salary average of 3 LPA.
According to the research it was found out that 61% of Americans have at least one credit card, compared to India only 4% of the total population has a credit card. In simpler terms out of 100, only 3 hold the card in India while 32 hold cards in America. For increasing the usage and to gain popularity among the customers the credit card providers several rewards.
How to redeem and earn credit card rewards?
Reward Points
Reward points are the points earned by the user while purchasing using their credit card. Later it is redeemed or exchanged for other services. Higher the purchasing value higher will be the rewards. For example, rewards will be higher for booking the flight ticket while it is smaller for grocery shopping.
What are the different types of credit card rewards?
Out of many rewards, the most commonly provided reward was three and those three are
- Cashback
- Miles
- Points
Apart from this catalogue, vouchers, donations, and other gift options. Rewards are not to restore the total money you spend on the card but to restore a little and for encouraging a user to use their credit card service. You need to analyze the credit card rewards before choosing them. Some of them provide miles as a reward which should be very useful for frequent flyers. And if you are not a frequent flyer then you must go around other choices.
Choose wisely the reward service which would offer more rewards at your type of spending. Example If you spend more on shopping choosing Amazon prime rewards Visa Signature card which suits best for online shopping.
1. Cashback
One of the most profitable ones among the rewards is Cashback. Here the credit card servicer has a partnership with grocery shops, malls, and other dining rooms. It depends upon the different services provided by the bank. In general for the total amount you spent you should get a cashback of 1% ie. 1Rs for every 100 Rs.
2. Miles
Generally, this type of reward adds extra miles which you should use for the flight trip. Many credit cards collaborate with several airlines and travel services. It must be the best choice for enthusiastic travellers to take out hotel rooms and rental cars. Another main advantage of this reward is this can’t expire over a while.
3. Points
At present most of the providers offer points as the reward which we can use at the time of purchase when we buy a product sold by their associated partner. Several discounts must be available while using this point at the time of buying in offline as well as online retailers. The credit card service provider offers the above-mentioned rewards.
How to redeem the credit card rewards?
Redeeming credit card rewards is not an easy thing. It must be done with some basic knowledge about redeeming otherwise you should end up using the reward up to its full potential
- Cashback, miles, points, are considered better for the user than other rewards due to their ease in using them.
1. Redeem credit card rewards from cashback
As the name implies you would receive a certain amount for the purchase you have done. It should be credited directly to your account or it will be reduced in your credit card bill. It varies upon the purchase for example you can receive 5% cash back on airlines, 3% on fuel services, 7% on car insurance, and 1% on other purchases. These are typically capped on a quarterly, or yearly basis.
- Though it has fewer redeem options than points and miles rewards. It is most straightforward in its value.
- Cashback cards must be fit in their natural way due to their flexibility in using them and less complicated in loss than other rewards.
2. Redeem credit card rewards from Miles
- This type of reward is provided when you bring the travel credit card then their rewards must be in miles.
- A person who has a travel credit card can be redeemed for air travel with the associated airline partner.
- Miles reward is also earned by the purchase as like cashback
- The cardholders will have several bonuses for airline tickets, other services include hotel, dining, and gasoline
- Even but you can only redeem the low-cost tickets using these miles you can redeem this during off-peak travel times.
- It has no foreign-transaction fees
- It has two types of travel cards one is a General Travelcard and the other is an Airline Travelcard.
3. Redeem credit card rewards from Points
- Once the credit card holder received enough points they can redeem it in the number of options offered by the banking services.
- Customers can redeem their points as a catalogue provided by the bank. This catalogue includes clothing, cosmetics, footwear, and eatables.
- Sometimes customers can redeem points in terms of vouchers. Vouchers are provided by the partners with whom they have associated.
- Also, they have allowed us to use the rewarded points for a donation. We can choose to donate to the charity. It will be converted in the form of money and will be donated to the chosen charity over a while.
While using one method only when you get a 1:1 value for your reward you can redeem it. If you can book a high-value airline ticket it was good, otherwise, you should look out for an alternative to redeem your reward. Don’t devalue the amount and points you earned. Cashback causes no trouble but for miles and points, you need to consider some of the ways are given below.
Ways that need to know while redeeming
1. Merchandise
- Since our credit card providers will have a partnership with International brands they should offer a chance to use our points to buy a product.
- Normally, this mis-values our points and miles
- They should not fulfil the 1:1 value ratio.
- If you need to verify, take the product value of the product you need to buy and then divide it by the points you earned.
- For, example if you have 12,000 points and you have to buy a vacuum cleaner costs of 500 you get the value of 0.041 which is 6 times less than that of 1:1 value
- We should alert while redeeming your points while exchanging them with merchandise for the product.
2. Statement credit on the travel card
- Statement credit works well for cashback cards but for travel cards, it can ruin your miles that has been earned
- In a travel card For every one point, you have earned a mile ie.1:1 Value
- For cash back cards if you recessive statement credit it satisfies 1:1 value but for the travel card it would not be worth half a value of 1:1.
- Better to use a points value calculator of your Bank if available.
3. Pay With Points
- Nowadays credit card providers offer a “Shop or Pay with points”. This should create a temptation among the customers.
- There should be a decline in the amount in the bill when you use this option.
- But it was not very profitable, for example, if you are buying a 100 Rs headphone for that you need 2000 points. Divide the amount/points 100/2000 it must be 0.05
- Hence it also won’t meet the 1:1 value criteria. These are some of the ways you need to be considered while redeeming. When your account remains open and in good standing, the rewards will be accessed. While you become inactive you will have a chance of losing rewards.
How to redeem credit card rewards?
Every bank has reward portals where all the rewards have been upgraded there. From there check the availability of current standings of rewards. Also, check the availability of redeeming options, calculate the 1:1 value, and redeem the rewards. The time taken for the redemption depends upon the service we have chosen. Normally Statement credit takes one week while other exchanging vouchers and within one minute we can have our gift options in our hands.
● The leading Hdfc bank allows you to redeem when you have earned 500 points you can credit it with gifts, vouchers, and discounts
● The ICICI Bank offers three choices for redeeming
1. You can choose over 1000 products on the Payback rewards catalogue and vouchers which consists
of electronic, mobile, travel, kitchen appliances, and more
2. Or choose any online retailers or their in-store and you can use your payback cards for the payment.
3. Or you can redeem the points as miles and fly with Jet airways.
● In Axis bank, you could first accept the terms and conditions and then click on the redeem option. We can choose the product we want to redeem in the redeem store and it will be added to the basket. These are the ways to redeem the credit card rewards from the Credit card service provider.
How to earn reward points?
Earning a reward is an automatic process and then the reward must be added along. The user doesn’t need to do an additional thing for adding up the points. The reward point is added every time automatically if you pay using a credit card. Usually, for every Rs100 to Rs250, the user will earn one point. Higher the value of purchase higher will be the reward points and vice versa.
Though the number of points you earned will depend on the purchase, the type of card, and the providing bank you have chosen. For example, a Tata card will provide you with 8 points for every Rs 100 you spent. At the same time, the co-branded State Bank of India Gold card provides you with each point for every Rs40. At the same time, the value of each point will also be different concerning credit card service provider.
Important factors while earning rewards
Though earning point primarily depends upon the card chosen, the banking service, and where you have done the transaction. In addition, there are several other factors there to notice.
1. Card variant
Users with a basic card variant can earn up to one point for transactions between Rs 100 to 250. But for the users with various gold and platinum credit card, the earning of points for transactions between Rs100 to 250 will be more than basic card users. When the basic card charge less for joining and less in annual fee while the gold and platinum cost more.
2. Co-branded cards
Most of the credit card providers have been in association with major stores, fuel providers and airlines, etc. For example, despite airline co-branded cards, you can avail yourself of extra reward points and discounts on booking the air ticket with the associated airline partner.
3. Spending place
Where you swipe the card will also be an important criterion. If you swipe your card in public utility services like electricity bills, water bills, etc the rewards will be lower. On the other hand, if you swipe your card in dining or for booking rooms and taxi services the rewards will be high. The reason behind it these companies will pay an interchange fee to the card provider for increasing their sales.
4. Festive season
When you swipe your card with the associated partner during the special occasion the rewards you earned will be higher than the non-festive occasion.
5. Cashback
If your credit card provider allows you to redeem the earned reward points in the form of cashback. Use this facility if available to utilize the reward points to their full potential.
6. Multiple cards
If you have multiple cards over the same service provider try to shift the points from one card and accumulate in one card and redeem it for better usage of rewards. But this will not work in the case of multiple cards in multiple service providers.
Before choosing the card select the card which makes the most sense for you and your lifestyle. Always have in touch with your credit card service provider, and update yourself with the redeeming option provided by them. Make every penny worth you spend by redeeming the reward in a useful way.
Can I get cash from my credit card points?
Only some credit card producers provide this facility to get cash from their credit card points. Sometimes in such case, they enable us to use our credit card points instead of cash to pay the principal amount.
Which is better reward points or cash back?
Each card is unique and good in its own use. We should prefer it by our need then only it will be more useful for us. In that way, reward points are better used for travellers and frequently travelling person tr. On the other hand cash back useful for those who travel rarely as they can get cash and use it purposely.
