Reward points are the incentives that credit card companies provide to their customers to encourage for using their credit cards more often. Reward points can be availed in different ways. Credit card companies come up with a lot of options to select from when a customer redeems the reward points. Reward points vary depending on the type of credit card and its features. Even for different type of transactions and activities on the card, the number of reward points credited varies. Credit cards are offered by so many companies, hence, to remain competitive in the market reward points offered by them could act as a selection criteria for customers.
Top Bank’s Credit Card Reward Points
Factors determining Reward Points
- Type or Variant of the Credit Card – Basic cards provide less reward points while premium cards bring more reward points to the customers for spending the same amount. Basic cards charge nominal fees while premium cards charge higher annual fees and joining fees. Reward points also vary depending on the issuing bank or company for the similar card variant.
- Cards with Co-Branding – Many credit cards come with co-branding with other large retailers, airlines, petrol companies and so on. If the card is used for purchase from the co-branded partner companies, those earn 5 to 10 fold higher reward points and discounts compared to the regular credit cards.
- Spending on Special Occasions – The same card can bring additional reward points if used on special occasions. For example, during festivals or during some promotional periods, cards earn extra bonus reward points on the spending.
- Where the card is used – Reward points can vary depending on where the card is used. Spending on restaurants gives higher reward points than spending the same amount in a grocery store.
Types of rewards available for redemption of reward points
Various types of rewards are offered while customers redeem their points. Not every card company offers all of these and the offer is guided by each company’s protocol. Some of the widely popular rewards are:
- Vouchers – Reward points can be redeemed to get vouchers of different retails and businesses with whom the card company is associated with. Sometimes vouchers can be utilized for online purchase as well.
- Cash – Some banks give the option to convert the reward points into cash which is credited to the card account. This could be used to pay out any outstanding balance and also saves money for card holders.
- Catalogue for merchandise and Services – Each bank will have catalogue with specific list of products and services with the mention of reward points to be redeemed for each of those. Some of the catalogue items are: clothes, accessories, foot wares, crockeries, books, stationaries, travel merchandise, electronic gadgets, beauty products and services like salon and spa, movie tickets and so on.
- Cash Back – Rather than getting reward points for shopping, the equivalent cash of those points will be given back to customer as cask back while making some purchase.
- Flyer mileage – Customers can directly earn air miles while making purchase or they can convert the reward points into flyer miles. These mile points could be redeemed for air ticket purchase or to get discount on air tickets.
- Donations – Reward points could be redeemed as donation to the charities listed with banks. Customers can select the charities they want to donate and reward points will be converted and equivalent cash will be given to the charity.
- Miscellaneous Redemption – Customers can redeem their reward points for buying fuels, enrolling in some courses, hotel bookings and buying travel packages. Reward points could be redeemed to certain shops directly while purchasing in case the business is partnered with issuing bank.
How to get the most out of your credit card reward points
- Cash is the King – It is best if the card offers reward redemption in terms of cash or cash back to the card balance or towards purchase. This is most popular and useful utilization of reward points
- Align the redemption with your interest – Be it air mile, fuel, service or merchandise, redeem your reward points for the things that fulfil your interest and requirement
- Choose the cards that offer best rewards – Before opting for a credit card, consider the reward points that the card offers and compare several of such cards. A moderate annual fee for card is good enough to offset the rewards earned
- Focus on a single card – Try to use one card for all purchases to maximize the reward point’s benefits and avail it more often. Cards which are less rewarding could be stopped using after careful consideration
- Reward Points come with Expiry Date – Make sure to check the expiry date so that points could be redeemed in a timely way. If a single card is used then more reward points get accumulated often and those could be redeemed more effectively within the expiry date
- Periodically check the terms and conditions of the reward points since banks modify those sometimes
- Make sure to pay credit card dues in time so that penalties and late fees are not imposed on the card. This will maximize the benefits of reward points
The reward points, as the name says, are lucrative to the customers as it brings different perks and benefits to them. However, credit card companies have even better incentive every time customer uses the card. They earn 1% to 2.5% of ‘Interchange’ fee from the businesses every time the card is used. Moreover annual fees are paid by the card holders for certain cards. That also adds to the income of the company. . A part of these fees collected is transferred to the customer as a profit sharing which we consider as reward offered by the card. And this drives the credit card companies to encourage customers to use their credit cards more frequently.
Customers should focus on their expenditure on the credit card as per their requirement and simply collecting reward points should not be the motivation to use the credit card.