Abhi
Wouldn’t it be nice if every time you paid for something, Santa came and gave you a small percent of it back to you? That is exactly what the loyalty points and credit card reward systems are for! Here are 7 ways you can plan your spending so that you get most rewards for your money.
What are credit card reward points?
Rewards and Points are a way for banks and credit card companies to “reward” users for spending money using their credit cards. This is to maintain user loyalty as well as simulate a spending habit among users.
Think of the mouse, mousetrap and cheese. The interest rates on credit cards are pretty darn high. It ranges from 30% and can go up to 60%, not to mention the added penalties, late payment fees and a damaged credit score if you fail to pay.
But, it is still a great idea for you to look at earning loyalty and bonus points from your purchases. All you need to do is be disciplined. Here is the right way on how to earn credit card points.
Right way to earn credit card points
Let me point out the wrong way of using your card to collect rewards first. If you end up buying things on credit with money you don’t have, you are doing it wrong!
The right way to use your credit card is to buy with a card only when you have the money in your hand. If you fail this, even the best credit cards promising the best rewards will end up sucking you dry with 30% or more interest.
So, no matter what you buy, at the end of your card billing cycle, when your payment is due, you should be able to pay it back. There should never be a time when you have a partial payment on your credit card and end up paying interest on your spending.
Now let’s get to how to earn credit card points.
Best ways to earn reward points
Go cashless. Swipe for Everything.
I can’t make it simpler than that. Use your credit cards for every possible transaction. Instead of using cash or a debit card, pay with your credit where possible and pay back your card at the end of the billing cycle.
Even the smallest of purchases when aggregated will get you some great bonus points and rewards over a period of time.
Pay for your colleagues, friends and family
The other day, American Express Cards was running an offer along with Tanishq. Anyone who buys gold from Tanishq store with an AmEx Gold card would get a 10% instant discount. I did not want gold.
I simply let the colleagues in my office know of the offer and said I have the Amex card, but am not planning to use it. Someone who wanted to buy gold approached me and asked if they could use my card and pay me back in cash. 🙂
They bought gold for Rs.50,000, which netted me total reward points worth Rs.450. My colleague was happy they got 10% off, I was happy to earn reward points for doing next to nothing. As simple as that.
Like this, I pay the bills and insurance for all my family members and collect the cash from them to pay back my card.
Just stay alert to the offers that come up on your cards. Even if you are not planning to make use of the offer, think how it may apply to others around you. Neighbors, car pool and Quickride buddies, book club members, and any trust worthy person who will pay you back.
Trust is very important when you give your card to someone. Try to avoid lending the card and instead, make the purchase on their behalf. If you have concerns on getting the money back from them, collect cash in advance before using your card.
Take on office expenses with your rewards card
If you have a lot of office expenses, which you need to pay first and collect from the office later then you’ve hit the reward point jackpot. Pay for these expenses using your credit card.
A few areas you can use this idea:
- Booking business trip tickets
- Paying for team and business lunch, dinner etc
- Purchasing office good, equipment
- Paying for seminars, webinars, courses that your office will pay you back later
- Cab and travel expenses
- Hotel stay during office travel
- Business softwares and subscriptions
Keep your bills ready as you may be asked to prove your expenses in order to claim back what you spent.
In my case, I pay for office and team lunch, dinners etc. I load the bills onto a portal and my company reimburses me in cash end of the month. I end up making 1% to 2% extra with my rewards credit card. I have a travel credit card that I use for office travel expenses that earn me air miles for spends.
Insurance, Home Loans, Investments, Rent
There are a tonne of places where you can use your card. Instead of paying with cash or a debit card, UPI or netbanking, be a Superstar and pay with your card. Later on pay the money back into your card.
Here is a small list of ideas.
- Insurance payments
- ULIP and even a few SIPs
- Some home loans can be paid via credit card. Explore…
- Rent (check out paying rent with CRED)
- Utility Bills
- these days, I pay my building maintenance with my card via Paytm
- Toll fees
Pro tip: Some websites such as utility or insurance companies may not accept payments using credit cards directly. In these cases, explore if you can make the payment using a 3rd party payment service provider such as Amazon Pay, Paytm, Phonepe etc. These guys will let you pay with a credit card.
Online Groceries is the smarter way
Eggs and milk can be bought with a credit card. Start ordering weekly and monthly groceries online. If you are not happy with the quality of vegetables alone (we are not, so we visit the store in person for this).
Buying groceries online open up more room for offers and discounts. Amazon runs weekly and monthly rewards program for various cards such as ICICI Rewards card, Citibank Rewards card, SBI rewards card etc.
Check out Amazon’s latest grocery deals here.
Check out my stack of credit cards that help me earn. Also, here are my monthly finance updates where I also mention the amount of money I make from rewards and earn cash backs from cards.
Make best use of the rewards structure available
Learn and understand the various rewards programs and rewards rate offered by your card. There are different programs and some of the best credit cards have multiple programs. Here are a few ways they do this
Balance transfer option
Time to time card issuers run balance transfer programs which may give you points for transferring balance from one card provider to another. Make use of it. End of the day, if you are planning to pay back the card, you may as well earn extra points and pay back.
Travel rewards and Air miles conversion
Not just reward points, some cards will let you earn points and convert them for air miles. From time to time, they even give you a bonus % when converting rewards points to Airmile. Last year, I was offered 25% for converting my Diners card points to Intermiles (earlier Jet). I took it as 1 Diners Rewards point was equal to 1 Intermile and with 25% conversion bonus, it was a great deal.
When using this, make sure the air miles value is the same or more than the value of your rewards points. There are a lot of cases where they hood wink you and give you cheaper air miles that is worth a fraction of your reward points.
Statement Credit
Some rewards credit cards will provide you statement credit on meeting spend criteria. SBI and Axis credit cads do this. Track and make use of these. If you are not spending enough, see if friends and family members have large purchases that they can make with your card.
Sign up bonus and Joining Bonus
Some rewards credit cards such as card from American express, Chase Sapphire, Chase Ultimate, the rewards cards from Wells Fargo etc carry joining bonuses. Eg make a purchase for $500 within the first 90 days to get $50 back. Make use of them.
Annual fee waiver
Some of the best rewards credit card come with an annual fees. And in most cases, depending on your usage this fee is worth it. And most of these cards have a spending threshold, which when met will mean you don’t pay the annual fee. Though this is not related to earning rewards, you still save money.
Cash rewards, Cash backs
Similar to loyalty points, card issuing companies run promotional campaigns such as instant discounts, cash rewards, cash backs etc. Watch out for these and make use of them when you can.
Things to keep in mind regarding credit cards
Bonus points, loyalty points and reward points are great. But don’t let your desire to earn them get you into debt. Credit cards have extremely high interest rates.
The last thing you would want is to end up paying 35% interest for 1.5% cashback on your credit card purchase.
Always plan your credit card purchases wisely and only use your card when you have the money to pay it back without incurring any interest.
