Credit cards usually come with attractive offers such as reward points, freebies, vouchers, discounts and other deals. Reward points are generally offered to urge customers to swipe their credit card instead of cash or debit card. Customers who do so earn points and can later redeem them for a range of deals and gifts. Reward points are valued at much lesser than the value actually spent on the credit card, but it is only a perk offered by the bank, and is not a way to earn your money back. Once you’ve collected enough points through your spends, you can exchange them for gifts, merchandise, discounts, vouchers, airmiles and so on.
What exactly is a reward point?
A reward point is a perk offered by credit card companies to cardholders as a reward for spending on their credit card. Customers can accumulate these points in their account and then redeem them for air miles, discounts, merchandise, products, vouchers and so on.
How to rack up these points
Ways to earn reward points are aplenty! Banks offer a range of options for customers to rack up points. But the number of points you can earn on your purchases depends on what type of credit card you hold such as a high priority card, a platinum card or a basic one. Generally, you will be able to earn points in the following ways:
- Regular Rewards - Every time you swipe your card, the bank will reward you with a set number of points for every Rs.100 spent. Usually, you can earn 1 point or upto 10x points.
- Welcome gift - As a joining gift, banks offer a reward points in bulk to customers. Once the credit card application is processed, the customer will be eligible to receive the points. Points are also awarded to those who use their card within the first 90 days of card issuance. You can bag a few thousand reward points right at the start.
- Accelerated Rewards - Banks tie up with stores, retailers, online merchants, restaurants, and so on. When you spend at these partners or on specific categories, you can earn additional reward points. For example, if you hold a shopping credit card, you can earn more points on retail purchases. If you hold a travel card, then you can earn extra points when you buy flight tickets, bus tickets, train tickets and so on.
- Bonus Points - When you spend a certain amount on your card annually, you can earn bonus points. For example, you spend Rs. 1.5 lakhs on your credit card in a month, you may be rewarded with 2000 bonus points, or any more expenditure in the month will earn double the reward points for every Rs. 100 spent.
- High-value Purchases - Spending on big money purchases such as electronics, jewelry, travel bookings, flight tickets, and holidays can fetch more reward points.
- International Rewards - Using your card internationally can help you earn higher rewards.
- Loyalty Points - Upon renewal of your credit card, banks offer a lump sum of reward points. You can earn quite a few points for just being loyal to the credit card.
- Supplementary Cards - You can extend the benefits of having a credit card to your family members. If they are 18 and above, they can hold add-on card. Points that are earned on these cards will be accumulated in the principal credit card account.
Credit card companies create a catalogue from which customers can redeem items in exchange for their reward points. These catalogues can be found online on the bank’s official website or on the bank’s reward website. Banks provide their customers with catalogues that detail the products or merchandise available for rewards redemption. Some banks have a separate website altogether for their rewards programme. This makes it easy for customers to manage their rewards and redeem them when they want. All offers are mentioned on these websites so that it becomes more convenient for the customer.
What can you redeem Reward Points for
- Merchandise - Refer to the rewards catalogue provided by your bank to see what products are on offer that match your points balance. Choose merchandise that you would like which could either be one product or multiple products. Merchandise can span across various categories that include:
- Apparel and Accessories
- Electronics and Appliances
- Music Accessories
- Home and Decor
- Travel Accessories
- Bus Tickets
- Air Tickets
- Health and Wellness
- Movie Tickets
- Hotel Bookings
- Mobile Recharge
- DTH Recharge
- Personal Care
- Gift Cards and vouchers
- Discounts - At partner stores or online merchants, you will be able to redeem your points for a discount on your purchase.
- Air miles - If your card is eligible, you can exchange your points for air miles with partner airlines.
- Cash back - Cash backs are great to reduce your credit card outstanding balance. You can convert your points for cash back which can then be either used to pay off dues on your credit card bill. If you do not have an outstanding balance, it can be used to shop on your credit card.
- Charity - Banks list out charities to which you can make a donation using your reward points. Donations include sponsoring midday meals, education for children, helping the blind, disabled, elderly, and the underprivileged. You can also make donations towards NGOs that carry out activities for employment, environment, health, traditional employment, youth and women. The donation will be made by the bank by converting the reward points earned into the cash value.
- Room Miles - At partner hotels, customers can use their points to get discounts on rooms and holidays. Under these schemes, customers can convert their reward points to room miles which they can redeem at the hotels.
- Transfer Points - Certain banks provide this option wherein customers can transfer a specified limit of reward points earned to their friends or family members who also hold credit cards from the same bank.
Things to keep in mind
While reward points are attractive, there are many things to bear in mind when it comes to using your credit card wisely and making the most of these points. To apply for a credit card may be easy these days, but being financially prudent with it may be a bit difficult. Be aware of the following points when it comes to rewards on your credit card
- Expiry Date - Most reward points bear an expiry date. Usually, from the date on which you earned the point, there is a 2-3 year validity. You should keep a track of your reward points, check your credit card status and redeem them before they expire.
- Minimum points needed- In order to be able to redeem reward points, you need to have accumulated enough of them. For example, you will be eligible to redeem your points once you’ve earned at least 500 points. Apart from that, most items, vouchers, merchandise, and so on, will require close to that. Each bank has a different set of rules, so you need to check with your concerned bank on the minimum requirement for redemption.
- Redemption Fee - For processing and handling your reward, there is usually a fee associated. This fee is approximately Rs.100.
Rewards are a great way to earn as you spend, but it’s not the sole reason to get a credit card. With the power of a credit card comes great responsibility. Shop wisely and make the most of your card.