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Earning and redeeming reward points is one of the most lucrative advantages of leveraging credit cards as a preferred manner of transacting. Over and above the general ease of usage, credit card points provide you allied benefits, example co-branded deals, flat percentage discounts, cashback, facility of easy EMIs and other customized offers that are tailor-fabricated with respect to diverse types of credit cards.

In a post-Covid world, payments via credit cards have grown exponentially, with consumers preferring to apply credit cards more often in identify of cash. Every bit per the Reserve Bank of India data, the full spends on credit cards have grown 25% annually for the last 10 years.  This is primarily due to the cumulative push towards a cashless economy, digital payments and a multi-fold increase in credit cardholders.

The adoption of credit cards also got a fillip on account of Covid-19 as customers preferred a contactless payment option. The RBI too increased the limit of contactless payments from INR ii,000 to INR five,000 effective from January 1, 2021.

Co-ordinate to RBI information, there were nearly 1.77 crore credit cards in force at the end of Jan 2012. The number has risen to a little more than 7.02 crore by the end of January 2022. The fast paced growth has enabled banks to offer newer products and to develop lucrative reward points structures for the card holders.

In that location has been a dramatic change in consumer behavior and preferences wherein they are continuously adapting to a digital globe and payments through credit cards is one of the most efficient channels of transacting as information technology allows customers to pay securely, and to besides earn rewards at the same fourth dimension. Moreover, there is now the selection for customers to split large payments into birthday more manageable equated monthly instalments (EMIs).

What are Credit Carte Reward Points?

Reward points are a perk or a benefit that customers derive when leveraging a credit card to spend on shopping, travel, dining or pecker payments. Typically, credit cards accept a flat reward points earning ratio which depends on the blazon of credit carte du jour and the issuing banking concern. Some banks award differentiated reward points on sure categories which are dependent on the type of card taken by the customer. For example, there are accelerated reward points on shopping at partner merchants.

For case: the SBI Simply Relieve credit carte du jour gives 10X or 10 times regular reward points for spends at movies, dining, departmental and grocery outlets. Citibank Rewards bill of fare gives 1500 bonus rewards points on activation of the card in 30 days from issuance. On spends of INR 20 lakh, Aye Kickoff Exclusive card awards 25000 bonus reward points on each card anniversary.

From a rewards point standpoint, consumers should evaluate the beneath-mentioned attributes:

• Expiry of reward points – Some credit cards deport reward points that elapse after a particular time menses. There are a handful of cards with the facility of reward points which never expire e.k. IDFC, YES Bank. Customers who are not regular in redeeming points should select cards where the reward points never expire.
• Reward points redemption fee – Most carte issuers accuse a flat fee for redeeming card points ; whereas a much smaller grouping of carte issuers do not collect a redemption fee.
• Minimum advantage points – At that place is a threshold of minimum number of points that can be redeemed; this minimum hurdle varies between the various types of cards. Some allow sachet type redemption whereas others permit redemption only later on a certain benchmark has been achieved.
• Coma of merchant categories – There are sure categories of spends like mobile wallet recharge, government taxes, court fee, amongst others, which do non entail earning of credit card reward points. These categories differ from issuer to issuer.
• Maximum reward points – Banks too limit the maximum amount of reward and accelerated reward points that a customer can earn on a single transaction, or on any ane day or month.
• Greenbacks Withdrawal and EMI conversion – In any case, banks generally don't offering reward points if a credit menu is used to withdraw cash from the ATM. Customers should not use a credit carte du jour to effect withdrawals from the ATM as it entails a withdrawal fee, and also interest is charged from the appointment of withdrawal till the amount has been completely repaid. Some banks practise non give points if a transaction has been converted into EMIs.
• Minimum transaction amount – Customers earn credit card points on swiping a card for a minimum transaction corporeality, or in multiples of the same. Case, you earn 1 bespeak for every INR 50 spent, and therefore 2 points for INR 100; when you spend INR 75, y'all will still earn 1 reward point. Whereas credit cards issued past some fintechs (example: One Card) accept obviated the above claiming and will really award one.five points for the INR 75 transaction.

Issuing banks and companies offer multiple routes for redemption of outstanding reward points; also, the redemption exercise has become more convenient on business relationship of instant online redemption. Customers have an option of redeeming their outstanding points for a multitude of benefits:

1. Gift vouchers – Most all issuing banks allow their reward points to be redeemed against gift vouchers, which are either emailed to customers or sent via postal mail. Banks tie up with multiple brands across categories like wearing apparel stores, amusement companies, hotels, restaurants – information technology is indeed a full spectrum offer. Exist careful, gift vouchers accept an expiry date and must be redeemed in time.
2. Catalogue rewards – This is one of the oldest redemption mechanisms, wherein  issuing banks maintain a catalogue of available merchandise (apparel, kitchen items, toys, books and periodicals) confronting which points tin be redeemed effortlessly. However, since the redemption is possible merely within the catalogued items, it can be restrictive.
3. Against bills outstanding – Points can be redeemed against credit bill of fare outstanding ante, subject to a pre-defined minimum threshold of points. This is a popular choice of redemption as it gives consumers the freedom to reduce their credit card bills by leveraging advantage points. The points can be efficaciously redeemed either by calling the contact center or later on logging onto the issuer's website or mobile app. Customers should of course enquire whether the value of the points accept diminished if these are redeemed against outstanding bills, when compared to alternating redemption mechanisms.
4. Redemption on partner websites – Some banks have tied-upwardly with online merchants and facilitate purchases at these outlets, to be duly adapted confronting reward points. Pop merchants where points can be redeemed are BookMyShow, Yatra.com.

Certain co-branded cards like "Amazon Pay ICICI Bank Credit Carte" let yous to earn accelerated reward points (prime members earn an astounding 5%) for Amazon purchases; these points can be redeemed on Amazon itself.

5. Redemption at merchant outlets – Additionally, a few banks tie up with offline retail merchants whereby a customer tin touch on purchases against redemption of reward points. Merchants where offline redemption is bachelor are Shoppers Cease, Clarks, Puma, Meena Bazaar, Godrej Nature's Basket etc.
6. Redemption at bank websites – For instant redemption of advantage points, customers can book travel tickets, hotel stays (or similar), on dedicated depository financial institution websites. A few pop ones are HDFC Banking concern Smartbuy, Yes Bank Rewardz.
7. Airline frequent flyer programs – Customers have a option of transferring their advantage points to airline frequent flyer programs e.g. customers tin can choose to transfer their points to Club Vistara, Singapore Airlines KrisFlyer, Etihad Guest etc.

Furthermore, for co-branded credit cards similar "Axis bank Vistara" and "6E Rewards Indigo HDFC Bank", accumulated reward points are utilized for booking tickets and flight upgrades.

8. Transfer to hotel loyalty programs – A few issuing banks allow transfer of reward points to the loyalty programs of various hotel chains. These features are by and large bachelor on travel credit cards. For instance, Citibank Premier Miles card allows transfer of points to Taj Inner Circle.
9. Pay with points – A very recent evolution permits purchases (typically modest sums) to be paid through points redemption: a SMS or an email is triggered immediately later on the swipe, offering instant redemption.
10. Clemency – A small number of menu issuers allow redemption of advantage points for donation to a partner charities.

Card issuers do release sleeky advertisements with captivating offers around buy of luxury goods, travel etc., and with the rapid advancement of digital banking, information technology has go much easier for customers to track and redeem their advantage points. The instant redemption facility can encourage customers to shop beyond their means.

Consumers should therefore practise caution and so that they don't spend beyond their repayment capacity, thereby entering a totally avoidable debt trap – the involvement rates on overdue remainder of credit cards are the highest when compared with whatsoever other form of personal credit.

Lesser Line

Over the past iii decades, credit cards rewards programs across the board take well and truly come of age, offering a huge boutonniere of attractive offers and facilities. For maximum value extraction, consumers are advised to assess their own private spend patterns and select a rewards plan which is best aligned to their preferences.

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Forbes Advisor adheres to strict editorial integrity standards. To the all-time of our noesis, all content is authentic every bit of the date posted, though offers independent herein may no longer exist bachelor. The opinions expressed are the writer's alone and take not been provided, approved, or otherwise endorsed by our partners.

Raj Khosla is founder and MD of MyMoneyMantra.com. He has three decades of feel in the cyberbanking and fiscal services space where he has worked on creating awareness on fiscal investments and offered tailored-financial products to Indian customers and minor businesses.

Armaan is the India Deputy Editor for Forbes Advisor. He has more than than a decade's experience working with media and publishing companies to help them build proficient-led content and constitute editorial teams. At Forbes Counselor, he is determined to help readers declutter circuitous financial jargons and do his bit for India's financial literacy.

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