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    How to Use Credit Card Reward Points

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    The concept of reward points on credit cards has been introduced by banks to encourage more and more customers to make use of their credit cards for purchases. Various credit cards being offered by banks nowadays now come with their own Reward Points Programs which allow customers to earn points on each purchase which they make with their credit card. Once the customer has accumulated a certain number of points, as per their Rewards Program, they can redeem these points for a number of benefits such as vouchers, cash back on future purchases, air miles and lots more. If you too have a credit card which comes with its very own Rewards Program, it might be beneficial for you to be aware about how you can earn and later use these reward points. So read on to find out more.

    What Are Reward Points?

    Reward points are points which a user can collect following each purchase that they make with their credit card. As it usually goes, higher value purchases will earn you more points than smaller value purchases. For example, if you purchase a flight ticket on your credit card, you will earn more reward points, as compared to when you make grocery payments with your credit card. These reward points can later be redeemed or exchanged for a number of things such as vouchers, select product / brand purchases, payment of annual fees, cash back on future purchases, air miles and lots more. Taking the instance of Citibank, credit card holders get to earn 1 reward point for every Rs 100 which is charged to their card.

    How Can I Redeem Reward Points

    Once the credit card holder has collected sufficient points, they can redeem those points in exchange for a number of options which are offered by the bank. An increasing number of banks are now offering a bevy of options when it comes to reward points. Considering that not everyone may make high-value purchases often using their credit card, banks also offer cash back against credit card reward points which can come in handy when you have to make smaller value purchases with your card. Certain banks may only offer a very basic catalogue of products which includes items for household and general use. Several credit cards are associated with ticket booking portals or airlines to offer rewards by way of air miles or discounts on travel bookings. Depending on what your bank offers, you may use your reward points in any of the following ways.

    • Catalogue – Various banks provide customers with a catalogue which contains products which the customer can exchange in lieu of their accumulated reward points. The choice of products may include categories such as clothing, eatables, footwear, accessories, stationery, crockery, travel merchandise, spa and salon services, movie tickets, etc.
    • Vouchers – Various credit cards offer vouchers as one way to redeem reward points. These vouchers can be redeemed at a number of stores which the bank may be associated with. Sometimes, banks also allow customers to avail these vouchers for online purchases with select online retailers. The value of these vouchers may range from as low as Rs 100 up to a few thousand rupees.
    • Cash – Another popular option offered by banks is conversion of reward points to cash. The converted amount in cash is credited to the individual’s credit card account and can be utilized to make any payments. Usually, card holders utilize this amount to pay off any outstanding balance on their credit card bills. Conversion to cash is a great option as it allows the card holder the save money that they’d otherwise have to spend towards their credit card bill.
    • Miles – Miles are an ideal option for individuals who are enthusiastic about travelling. Several banks partner join hands with travel booking portals or airlines to provide card holders with travel related rewards. While in some cases, card holders can earn air miles directly from the purchases which they make with their card. Else, the customer can get their reward points converted to air miles. These miles can later be redeemed for payment of flight tickets or for discounts on flight tickets.
    • Donations – Certain banks also allow card holders to donate their reward points. Customers can choose to donate to a charity of their choice. The reward points will be converted into cash and then donated to the charity chosen by the card holder.
    • Cashback – Another option when it comes to redemption of reward points is cash back. Instead of receiving points for a purchase, the customer will receive a certain part of their purchase amount back as cash back.
    • Other Options – There are a few other options which banks offer customers as a part of their reward redemption program. These include points on fuel purchase, training, classes, availing specialized services, entertainment related purchases. Additionally, card holders can also redeem their reward points in exchange for discounts on vacation packages, hotel bookings, etc. If the bank has partnered with certain store, then customers can use their reward points to make purchases at the store.

    How Do I Earn Reward Points

    Earning reward points on your credit card is an automatic process. The cardholder does not have to do anything extra to earn these points. Each time your card is swiped for a purchase, you get reward points. Usually, for every Rs 100 to Rs 250 that is charged from the credit card, the cardholder earns one point. Also, the higher the value of your purchase, the more points you earn and vice versa. However, the number of points that you collect with every purchase will depend on the type of card you have and the issuing bank. For example, co-branded cards will fetch you more points than a regular card. Like the State Bank of India Gold card will fetch you one point for every Rs 40 spent on the card, whereas the co-branded Tata Card will fetch you 8 points for every Rs 100 charged to the card. The value which each point carried will also vary across banks and credit cards.

    Factors Affecting Reward Points

    The points you earn will depend on the value of your transaction, the type of card you have and the bank which has issued the card and sometimes, also on the place where you have carried out the transaction. However, there are other factors which affect the overall points you earn and their value.

    • Card variant – Card holders with a basic card variant will earn about one or two points for each transaction of around Rs 100 to Rs 250. However, cards that are of a higher variant, i.e. premium or super premium cards, will easily fetch much more points against purchases. For instance, for every Rs 200 that is spent on weekend dining on the Axis Bank My Zone car, the card holder gets to earn up to 40 rewards points. Similarly, American Express provides one point for every Rs 40 spent charged on their platinum card variant and one point for every Rs 50 that’s is charged to a super platinum card. While basic, entry-level cards charge a nominal fee, premium and super premium cards will carry a significantly higher annual and joining fees.
    • Co-branded Cards –Banks and card companies launch co-branded cards in association with major stores, brands, fuel providers, airlines, etc. Co-branded cards fetch reward points which may be as much as 5 to 10 times higher as compared to most other cards. For example, in case of airline co-branded cards, cardholders can avail extra reward points and discounts when they purchase tickets of any partner airline with their co-branded card.
    • Where You Spend – The number or value of reward points that you will earn also depends on where you swipe your card. Swiping your card to pay for your electricity bill will earn you lesser points than it would when you swipe it at a restaurant to pay for a meal. The reason behind this is that the restaurant may be providing the your credit card company with a higher interchange fee in a bid to increase sales, whereas that may not be the case for a utility services company such as the power corporation.
    • Special Occasion Spending – If you swipe your card to make purchases during special or festive occasions, you can get bonus points. For example, if you swipe your card on Christmas, you are entitled to extra bonus points. Some banks also offer bonus points to premium card holders on joining.

    What To Remember About Reward Points

    While they are fairly simple to accumulate and are always welcome, there are some things which you must keep in mind about reward points. It can definitely be a little challenging to calculate your spending and the points you have accumulated as a result.

    It also may happen that, the cost of the product you select may be lesser in stores and higher if you pay for it with points. Since the points seem like they’re freebies, we might not take the trouble to figure it out. So, if you are looking to get the most from your credit card reward pints, here are a few things to remember.

    • Reward points come with an expiry date. Be aware of when your points expire and redeem them before they do.
    • Vouchers are great for gifting purposes or if they are of use to you. It often happens that vouchers will require you to spend way more that they are really worth, just so you can redeem them. Also, vouchers too have an expiry date, so keep that in mind too.
    • If your credit card account has outstanding balance which needs to be paid, converting your points to cash is the wisest option. Conversion to cash is a great option as it allows the card holder the save money that they’d otherwise have to spend towards their credit card bill.
    • Co-branded cards usually carry a limitation in terms of their accelerated reward points they offer. The reward points earned on these cards can usually only be redeemed against products and services offered by a partner establishment, if not the very brand itself. You will accumulate points against your purchases and not withdrawals.
    • Reward points are simply a bonus perk on your credit card. Don’t make purchases only to collect points.
    • Ensure that you pay your credit card bill in time so that you needn’t pay for delayed payment fees or interest on your card. Also, this will make your reward points completely worth the value.
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