Besides the regular benefits offered by credit cards like the revolving credit, cash withdrawal facility, etc., the rewards add value by providing additional privileges.
Choosing a credit card with right benefits is important because not all the rewards offered on the card are suitable for everyone.
For instance, if you travel a lot and have a credit card that offers more benefits on online shopping, that isn’t a right card for you.
Today, as we have the time and tools to know about various credit cards, compare and choose the one that exactly suits our needs, we should not pick the cards randomly.
The three popular credit card rewards
Of all the rewards offered by credit cards, cashback, air miles and reward points top the list. Some credit cards offer only one type of reward, while some other cards provide multiple benefits.
If you don’t have any specific spend target, you can opt for cash back and rewards credit cards. The cards that provides air miles are more suitable for those who travel a lot, both locally and internationally.
Let’s look at each reward in detail to know better about the same.
Rewards credit cards
Reward points is one of the common features offered on almost all the credit card. While some cards offer reward points at a standard rate, others offer accelerated reward points on specific spends, say shopping, dining, etc., based on the card type.
The interesting part about the reward points is the redemption option. Every card issuer has an elaborate rewards catalogue which offers a wide range of redemption options starting from lifestyle products, apparel, gift vouchers, mobile phones, discount coupons and lot more.
Once you earn a minimum number of reward points, you can redeem the same for similar value products from the catalogue.
Some card issuers also allow redemption of reward points against cash or card outstanding, for fuel purchase at petrol stations, for direct shopping and for air miles. Again, it depends on the type of credit card.
One drawback with rewards credit card is that the point’s accrual is completely dependent on the amount spent on the card. If you don’t spend anything, you cannot earn any reward points nor can you redeem any gifts. Redemption fee and limited time validity of the accrued points are other drawbacks of the feature.
Some of the best rewards credit cards available include –
- HSBC Smart Value Credit Card
- YES Prosperity Reward Plus Credit Card
- HDFC Freedom Credit Card
- Standard Chartered Platinum Rewards credit card
Cashback credit cards
Another interesting reward offered on credit cards is the cash back feature. Every time you shop using your credit card, a small percentage of the transaction amount will be credited back to your account. The cash back amount would sometimes be more on specific categories based on the card type. Hence, based on your spending pattern you can choose the cash back card that provides maximum benefits on your spends.
Some of the drawbacks on cash back credit cards are that except for that cards that provide instant cash back feature, other cards which offer redemption against card outstanding require you to earn a minimum amount for redemption.
Some of the best cash back credit cards include –
- Citibank cash back credit card
- HDFC Bank MoneyBack Credit Card
- YES Prosperity Cashback Credit Card
- Standard Chartered Manhattan Platinum Credit Card
Air Miles Credit Cards
Air miles is another incentive offered on credit cards, especially on the travel category. Travel credit cards are typically co-branded with an airline company and provide air miles pertaining to that airline. For instance, credit cards associated with Air India offer Air India Miles, Etihad Airways provides Etihad miles, Singapore Airlines provide KrisFlyer miles, etc.
The air miles can be redeemed for discounts and other benefits while booking tickets on the associated air lines. Other benefits include extra baggage allowance, priority check-in, upgrade to Business class, etc.
On the flip side, these credit cards come with a high annual fee and sometimes with high interest rate.
Some of best travel credit cards include –
- HDFC Bank AllMiles Credit Card
- Jet Airways ICICI Bank Rubyx Credit Card
- Air India SBI Platinum Card
- Citi PremierMiles Card
How to match my spends and the rewards on my credit card?
Now that you got to know the popular rewards offered by credit cards, it’s time to evaluate your spending behavior.
If you already have a credit card, go through your previous credit card statements and highlight your regular spends or the category of spends. Once you have the list of all the spends, categories them and try to figure out the most common ones.
If you spend more on a particular category, say travel, it’s obvious that you need to have a credit card that provides travel benefits.
Instead if your expenses are spread across categories, you still have an option to choose a card which provides uniform benefits. You can also ask the card issuer if any customization are available on a particular credit card.
Once you figured out your common spends and the list of credit cards that offer rewards on that category, you can shortlist a card based on the other features, annual fee, interest rate, offers, etc.