Questions on Credit card rewards and cashbacks (S1E9)

There are so many questions on how cashbacks work, how to earn rewards and how to use reward points. Let's look at these perks of credit card in detail
Introduction to Little Saves podcast on Personal finance

—Podcast Transcript—-

Hey there!

Welcome to episode 9 of the Little Saves Podcast. I am your host Abhi. We meet every Tuesday to look into interesting aspects in the world of Personal finance and learn to manage our money better.

I wrote an article on 7 ways to earn reward points with your credit card and few weeks back. I received a few questions from readers via social media and email asking for more details with particular cards such as ICICI Credit cards, SBI and HDFC credit cards. Since I own these cards (check out my awesome stack of credit cards here), let me try to answer these questions here.

First let’s look at a few questions on Cashbacks and then we shall get into details of rewards points.

Which credit cards give highest cashbacks in India?

In India, Flipkart Axis bank Credit card gives the highest cashback. They give 1.5% of your expenses on all sites and upto 5% of your spending on partner sites. Close second is the Amazon ICICI Bank credit card that gives 1% cashback on all sites and up to 5% cashback on partner sites.

How do cashback models and cashback offers works?

Cashbacks on credit card is a type of offer designed to reward you for making purchases using the particular card. Say you buy something for 100 bucks, if you use cash or a debit card you will pay 100. However using a cashback card that gives 1% cashback, you pay 100, but you get 1 buck back in your next billing cycle. This means, you are only paying 99 and saving the 1 buck.

Is cashback real money?

Yes, cashback is pretty much real money as this is money you would have otherwise paid, instead you are saving it. So for cash back that you earn is pretty much real money.

What is the benefit of cashback card?

The major benefit of a cash back card is that for all qualifying purchases, you will get part of the money you spend back. Eg: Say, someone pays Rs.1000 for telephone bill using cash. When you make this same Rs.1000 using the Axis Flipkart credit card, you get 1.5% back, meaning you only pay Rs.985 and save 15 bucks.Most cashback cards come with other great tie ups and discount options.

What is the best way to use credit card points?

Depending on the type of card you have, you can either encash the reward points for money or use the credit card points to redeem gifts or vouchers.

Can I use my reward points to pay my credit card bill?

Yes, you can use reward points to pay your credit card bill. Most cards allow this. In India, SBI credit cards, Amex cards, HSBC credit cards, HDFC cards and Axis cards support redemption of points in lieu of your card bill.

How do I redeem my reward points?

Visit your card website or the app from your credit card provider. They will have a catalog of rewards that are available as per the total points you have. Select the reward that you like and provide your details to redeem it. If you have any questions contact their customer care.

How do I get the most credit card points?

You can maximize your points earnings by using your card instead of cash for all transactions and later paying the cash into the card. The other way is to plan your purchases wisely.

What is the value of HDFC reward points?

The value of HDFC reward points depend on the type of card. In my case, I have a HDFC Diners Rewards card, each point is worth about 0.4 rupees.

How to calculate value of rewards points?

To calculate how much each reward point is worth, find out how many rewards you need to redeem a product. Find out the real world value of the product. Eg: Lets say you need 10,000 SBI Card points to get a Rs.3,500 Amazon voucher. In this case, the value of each point is 0.35 rupees. That is total cost of the reward divided by the number of reward point needed.

Can we convert HDFC credit card reward points to cash?

No, credit card rewards points cant be directly converted to cash. Instead, you can redeem your points to pay the bill on your credit card. This is almost the same as converting it to cash.

Should I redeem my credit card points?

Absolutely! Credit card points are given to you by the credit card provider to earn your loyalty. There is a good amount of value in then, so it is good if you make use of if and save some money. Every year, I personally save over Rs.20,000 just from credit card points and cashbacks.

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Abhi

Abhi is a 29 yr old Indian, on FIRE to retire by 40. He has been investing and learning Finance for the past 12 years. After completing Mechanical engineering, he started working in a multi-national Bank and grew to become an AVP. Currently with an IT MNC as a VP. He lives in Bangalore with his wife and their 1 year old daughter. In his free time, Abhi loves to game on the Xbox, watch movies, read and blog.

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