When choosing a credit card, one of the most important factors potential customers consider is how to maximise benefits. The most common benefits customers look for in credit cards are reward points and cashback offers.
To choose a card that comes with the best rewards and cashback offers, you must factor in your spending habits, financial goals and lifestyle. It is important to understand the pros and cons of each credit card to optimise benefits.
What Are Credit Card Points?
Credit card points are rewards earned on your card spending. Typically, a credit card user earns a certain number of points on the amount spent.
These points can be redeemed for rewards, such as flights, hotel bookings, gift vouchers and for buying electronics and gadgets.
What Is Cash Back?
With cash back, you get a percentage of your spending back in cash. The cash back amount can be adjusted against your total outstanding.
For instance, a card offering 5% cash back on online shopping might give you Rs 50 back for spending Rs 1,000 on an e-commerce platform. This amount will be credited back to your card account.
Credit Card Points And Cash Back: Which Is Better?
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Flexibility
Cash back is highly flexible. You don’t need to worry about going through reward catalogues or expiry dates.
With reward points, your redemption options span from travel to gadgets to gift vouchers. However, the value of points can vary significantly.
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Value For Money
On opting for cash back, you get a fixed percentage of the transaction value back. However, the rates for cash back are often lower than the value of reward points for high-end redemptions.
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Ease Of Use
Cash back is simple and comparatively easier to understand. The cash is credited directly to your account or issued as a voucher, often with no expiry.
On the other hand, redemption points can be complex, involving reward portals, minimum point thresholds or specific partners. Points often expire if not used within a due date.
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Annual Fees And Costs
Credit cards with attractive rewards often come with higher annual fees. However, these fees may be waived if you meet spending thresholds. Many cash back cards have lower or no annual fees, making them cost-effective for budget-conscious users.
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Suitability
Credit cards that offer reward points are ideal for frequent travellers, big spenders, or those who enjoy lifestyle rewards. Cash back is better for everyday use and getting instant savings.
To conclude, both options have their pros and cons. You must always read the terms and conditions of any credit card before applying. The best card is the one that aligns with your needs.
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