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How To Use Card Reward Points For Maximum Benefits

Adhil Shetty


Who doesn’t like to be rewarded? And when this reward comes in the shape of cashback, discounts, it becomes all the more special. When you use a credit or debit card, you are rewarded with points that get credited into your account. These points can be redeemed while shopping for products specified in the company catalogue or by the bank’s partner companies. If used smartly, these reward points could prove beneficial. So here is a lowdown on reward points to draw maximum benefits from them.

The Basics Of Reward Points

Every time you use a card to make a payment, the card provider receives an interchange fee for the transaction. The interchange fee, which is charged from the merchandise, is around 1% to 2%. The card company uses a portion of such interchange fees to give it back to the card user in the form of rewards and cash back for promoting card usage.

Which Card Gives You More Reward Points?

Usually, a high-end cards provides more rewards points as compared to a regular card against each transaction. A basic card may give you 1 or 2 points for every Rs 100 spent, whereas a premium/high-end card could fetch you around 5 to 6 points for every Rs 100 spent. A basic card may come free, whereas you may need to shell out a significant annual fee for a premium card; therefore the reward point structure is accordingly attractive for the later.

If you frequently spend money on specific things like travelling or shopping, you can use a co-branded card that can earn you attractive reward points on spending money at its partner merchandise.

On regular payments like electricity or telephone charges, the card company usually gets lower interchange fee than merchandise, therefore you may earn little reward points while you spend money at such places.

Card companies come up with special offers from time to time, especially during the festive season. It offers bonus reward points on making transactions at specific merchandise.

How To Best Use Reward Points

Usually, the value of one reward point offered by card companies is 0.20 to 0.30 rupees. Some card gives the value up to 0.4 rupees. Depending on the price of a product available in the reward catalogue provided by the card company, you may get higher redemption value on specific items. Redemption can be done through the card provider’s portal or at associated merchandise outlet or portal.

Before using the reward points, you must compare the price of the product in the catalogue with the price offered at other merchandise in the market. Sometimes you may find that the product is available at a cheaper rate in the market than what is mentioned in the catalogue. You would obviously not go for a higher price just to redeem points.

Some card companies allow adjustment of the annual charges on a card with the available reward points, which can be a good way to use the points. If you have wealth/family account, some bank offers to pool all the reward points accumulated under a single account. This helps in getting a better deal at the time of redemption. Some co-branded card offers a better reward to Rupee value when the points are redeemed at its associated merchandise.

The accumulated reward points are the incentive that you get when you spend your hard-earned money; therefore you should try to use it wisely.

What You Need To Know

-Reward points come with an expiry date. So, you should try using them before they lapse.

-The card user needs to pay a redemption charge when using the reward points.

Earning reward points should not be your primary focus when using a card, and if you have accumulated points, you should use it smartly to maximise the benefit of your card.

The writer is CEO, BankBazaar.

BankBazaar.com is a leading online marketplace in India that helps consumers compare and apply for credit card, personal loan, home loan, car loan, and insurance.