How Do Credit Card Reward Points Work

Everyone uses credit cards because of their numerous benefits- the freedom of purchasing, convenience, and exciting rewards on every purchase. 

Today, you can apply for a credit card online in India with virtually any bank or credit card company. If you want to get one, you can do so online without the hassle of paperwork, and your card will be ready to use in just a few days. If you plan to get one mainly for saving money with rewards, this article is for you.

The reward point system for credit cards differs among banks. From accumulating reward points to redeeming them, the process can be different each time. To help you, here is a guide on how reward points on credit cards work. 

Accumulating Reward Points

For most credit cards, you get reward points every time you pay using your card. Typically, the amount of reward points you get is proportional to how much you spend. However, sometimes there is a cap on the number of reward points per purchase. 

Here are some scenarios in which you get reward points:

  • Welcome points: You can apply for a credit card online in easy steps and earn reward points as soon as you receive it. That’s right! Your bank will credit some reward points to welcome you aboard before you even use your card. 
  • Regular reward points: You earn these points every time you swipe your card. Typically, every Rs. 100 that you spend fetches you one reward point. 
  • Accelerated reward points: If you buy something from a partner store, i.e., a store affiliated with your credit card provider, you get extra reward points. 
  • Loyalty points: Credit card providers may also offer rewards when you renew your credit card. 

How Much Is A Reward Point Worth?

Depending upon your credit card provider, the worth of these points may vary. Most cards increment your balance by one reward point for every Rs. 100 spent. The monetary value of this point may be around 40 paise to 60 paise. 

How To Redeem Reward Points?

Redeeming your reward points is exciting! But before you can do so, note that banks require you to maintain a minimum number of reward points before you can redeem them. 

Once you have enough points, you can convert them into their cash equivalent to pay your credit card bill. Additionally, some banks offer you coupons and exclusive deals at their partner stores in exchange for reward points. For instance, you can use 100 reward points to obtain a voucher that entitles you to a 5% discount on select stores. 

Each time you use your reward points, a redemption fee is applicable. So, before you decide where you will redeem your hard-earned points, check where you can do so, how much money you can save, and how much fees you will have to pay.  

Do Reward Points Expire? 

While some reward points like frequent flyer miles and hotel points are valid for many years, others may come with an expiry date.  

Check your reward points balance on your bank’s online credit card portal, and notice how many of them are about to expire. Try to redeem these reward points as soon as you can. 

How to Earn More Reward Points? 

When you apply for a credit card online in India, your bank will ask you to select a credit card variant. Choose one that suits your lifestyle. Use it frequently and amass a good amount of rewards. 

So, if you travel a lot, sign up for a travel card and use it often to enjoy hotel discounts and frequent flier miles. 

A Word of Advice

While reward points are an excellent incentive to shop using credit cards, you should not use your card recklessly solely to accumulate reward points. By doing so, you may exceed your credit limit and affect your credit score negatively. 

 

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