How do Credit Card Rewards Points Work and is it really worth it?

By exploring credit card types and variants you may choose to apply for a credit card that matches your requirement. The type of credit card varies with purposes such as travel, dining, shopping, movies, and others. credit card variants range from entry-level to premium or super-premium, with a difference in fees and features. Yet, every type and variant offers credit card Reward Points.

You can collect credit card reward points on credit card purchases. When you apply for a credit card, you may compare the fee, rewards mechanism, and benefits to make it a worthy deal. You can redeem or exchange the points earned on different offers.

How to earn reward points

You earn reward points on a certain price limit of purchase using a credit card. It is an automated process. All you have to do is swipe/use a credit card to make the purchase, and the reward points will be credited to you. For example, if you buy groceries for ₹ 200, you may earn 1 reward point as per the credit card reward mechanism. If you make higher purchases using a credit card, you can collect higher reward points and vice versa.

The reward points vary across types of credit cards. Say, a co-branded credit card may offer higher rewards. For instance, a co-branded card with an airline company may offer 5 reward points for booking a flight ticket. With an entry-level credit card, you may earn 1 reward point for booking the same flight ticket.

How to redeem reward points

Once you collect adequate points, you can apply for credit card-enabled offers by redeeming or exchanging your reward points. The offers apply for credit card type and bank in the following manner:

• Cashback

You can redeem your reward points for a cash-back offer. The collected points on purchases can be redeemed for a certain amount of cashback.

• Catalog

In place of reward points, you can access an array of options as a catalog that the bank offers. A catalog presents different categories such as footwear, clothing, eatables, etc., to redeem the points.

• Donations

You can choose to redeem the reward points to make donations for charitable purposes. The bank converts the points to cash and contributes to the chosen donation.

• Vouchers

The bank may offer different vouchers in exchange for reward points. You can use the vouchers in retail stores associated with the bank.

• Miles

Airmiles is a type of reward that banks offer for travel enthusiasts. Reward points can be exchanged for air miles, say, a discount on flight tickets or other travel-related rewards.

• Other offers

The reward points can be exchanged for other offers such as specialized services like training, classes, entertainment, etc. Other offers depend on what the bank provides in liaison with its partnerships in exchange for rewards.

What determines reward points

When you apply for a credit card, carefully examine the details of credit card reward points. The reward points mechanism depends on factors such as:

• Spending on a special occasion

There is a high scope for the addition of reward points when you purchase on a special occasion. A purchase on New Year’s Day can fetch higher reward points than a purchase on a regular day.

• Place or purpose of spending

You may earn more reward points on credit card payments in a retail store than for telephone bills. The partnering company with the bank, say retail store, offers a high interchange fee in a bid for boosting sales. However, this isn’t prevalent with corporations in utility services.

How to make the most from reward points

You may keep the following points in mind to make the most from your credit card Reward Points:

• The expiry date of reward points determines the eligibility for collecting and redeeming the reward points.

• The expiry date of offers such as vouchers is to be noted in redeeming reward points.

• You may be levied with reward points redemption charge. It is a fee that varies from bank to bank or card type for redeeming rewards points.

• You can redeem reward points for a cashback offer if you have an outstanding credit card payment.

• Co-branded card offers may present a choice across products and services to redeem reward points.

• Reward points become worth the value on prompt credit card payments by preventing interest or delayed payment fees.

Are reward points worth it?

If you have a credit discipline, credit card reward points are an advantage. Your spending psychology and practice to make purchases for needs and not for rewards determines the reward worthiness. You may apply for a credit card to utilize credit for purchases rather than reward points. Reward points as a bonus are one of the best uses of a credit card.