Credit Card Reward Points: Redemption value, expiry, how to use, watchouts – Explained

Reward points earned varies from card issuer to issuer and depend on the card type, spend types, mode of card transaction whether online or offline.

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Premium credit cards usually offer higher reward points on dining, travelling, overseas spends etc than regular credit cards.

Credit card reward points have always been a prized possession for many cardholders. The points earned can be used to purchase goods, merchandise, services or even be converted to cash. The reward points are earned by card holders on the basis of transaction value but there are a lot of different ways in its earnings, redemption and usage.

Before we see how reward points can be earned on credit card spends and how much they are worth, remember to make the full outstanding payment on the due date without revolving credit over to the next billing cycle.

How do you earn reward points

Every time you use the card, you do not earn points as it will depend on the amount of transaction as well. On some cards, 1 reward point is earned on spending in multiples of Rs 150 while others may offer 2 points or even more on spending of Rs 150 or Rs 200 or more.

For every rupee spent, the reward points earnings vary across cards and issuers. “Reward points earned varies from card issuer to issuer and depend on the card type, spend types, mode of card transaction whether online or offline, etc,” says Sahil Arora, Director and Group Head, Investments,

As against those cards that come free without annual fees or where the fees is waived off in the first year, the premium cards generally provide more points for every rupee spent. “Premium credit cards usually offer higher reward points on dining, travelling, overseas spends etc than regular credit cards. For instance, HDFC Moneyback Credit Card provides 2 reward points on every Rs 150 spent and 4 reward points for every Rs 150 spent on online transactions. However, HDFC Infinia, a premium credit card, offers 5 reward points on all retail spends of Rs 150 and up to 50 reward points on travel and shopping spend made on HDFC Smartbuy while 10 reward points on dining spend at standalone restaurants,” says Sahil.

Bonus reward points

Some issuers may pass-on additional bonus points if the cardholder spends a certain amount in a year. Sahil says, “Credit card issuers may also offer bonus reward points to their cardholders on spending beyond a threshold limit. For example, HDFC Regalia credit card offers 10,000 reward points on crossing annual spends of Rs 5 lakh and an additional 5,000 reward points on achieving annual spends of Rs 8 lakh.”

Not all cards give reward points

Reward points may not be available on all credit cards, hence check before getting them. There could be some cash-back cards on which the cardholder gets a cashback on transactions made but not the points. “Credit card issuers offer reward points on almost all card types, except in the case of some of the cashback and discount specific credit cards. For example, HSBC Cashback is a cashback specific card that offers 1.5 per cent cashback on all online spends and 1 per cent on other spends while Standard Chartered DigiSmart is a discount specific card offering discounts and cashback on spends on selective portals,” adds Sahil.

Redemption value of reward points

While more points on lesser spends is a good sign, equally important for the cardholder is to see if the redemption value of the point is competitive. In some cards, 1 point may be equivalent to 20 paisa while in others it could 33 paisa or even higher. This will be known by the value of the merchandise that you wish to redeem for the points. “The redemption value in case of other card categories will primarily depend on the market price of merchandise, service or discount vouchers that you receive in lieu of redeeming your reward points. For example, HSBC’s reward point program gives a Rs 500 Flying Machine e-voucher in lieu of 2000 reward points whereas a Rs 500 Lifestyle Stores e-gift voucher would cost 2500 reward points,” informs Sahil.

Do reward points expire?

Keep an eye on the credit card statement. Your reward points may expire after a certain period. “The reward points of most credit cards expire within 2-3 years from the date of their credit. Those failing to redeem their credit card reward points by the date of expiry would end up losing their accumulated reward points. Rewards points of card issuers like Citibank and IDFC First’s Millennia, Select, Wealth and Classic credit cards never expire,” says Sahil.

Best way to utilize reward points

While redeeming points, do not be in a hurry, rather explore other options as well. “Before redeeming the reward points, cardholders should also compare the cost of the service/product in the issuer’s reward catalogue with the cost being offered at various online and offline. Cardholders should also factor in the redemption charges as some issuers charge a redemption fee at the time of redemption,” cautions Sahil.

If the card issuer allows one to adjust points against the petrol bill or for settling the card bill, nothing like that. “Some credit cards allow their cardholders to adjust their outstanding credit card dues against their accumulated reward points. Such cardholders should keep using those accumulated credit cards to repay their credit bills if their card issuer’s reward catalogue does not offer good deals,” says Sahil. In the cards that allows one to buy petrol or convert points into cash towards payment of credit card bill, the redemption value is the most.

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