Factors to consider before choosing a rewards credit card

by Sathishbabu Raghav Financial Adviser

Credit cards come with several advantages for people. From access to funds during emergencies to foreign currency transactions while travelling abroad. However, one of the biggest advantages credit cards have is its reward points.

Many people often get confused as to how it works, but they are highly beneficial once you have accumulated enough points. You can even purchase return flight tickets if you have enough points.

Most credit cards give you reward points with every transaction you make. For example, a standard card offered by HDFC offers a minimum of 2 reward points for every Rs.150 spent on the card.

However, there are terms and conditions surrounding these offers.

A rewards credit card is a card which offers reward points for every transaction made on the card. Some of these cards offer accelerated points for a specific type of expenditure such as travel, dining, shopping, etc.

Here are some of the factors to consider before choosing a rewards credit card

Net benefits

All credit cards come with several reward point benefits for customers. However, it is important that before taking a card, you have checked the net benefits which are offered.

Rewards come in different types such as points, cashback offers, discounts or a combination or all the above. Along with checking the single category benefits, the net benefits offered by various cards should also be a major factor to choose.

Changes in reward structures

The rewards which a credit card comes with changes on a regular basis. If you are taking a card solely because of its benefits offered at that time, don’t.

It takes time to maximize your rewards and earn points. Once you understand how to accrue these rewards, you can earn points with every transaction made.

For example, if you have more than one card, which one will help you earn the most points for fuel or retail expenses?

Lifestyle

Your lifestyle will play a major role in the type of credit card you need to purchase. There are credit cards which are specially curated to offer a wide range of lifestyle benefits such as movie discounts, dining offers, complimentary club memberships and much more.

How you spend your day, how often you travel, the hotels you stay at, the flights you choose and so on is your lifestyle which does not change frequently.

Hence, it is important to understand your needs and requirements on a daily basis and then choose your credit card.

Ways to use the rewards

Since rewards come in different types such as points, cash back, air miles, discounts or even vouchers, you should know what is the most effective for you.

If you are a frequent traveller, a credit card which mainly offers cashback rewards can be the right choice or the ones which offer air miles on every transaction.

Hence it is important that you understand what category of rewards you prefer depending on your needs at home and at work.

Value of points per Rs.100

Many credit cards given by banks in India offers reward points on a minimum expenditure of Rs.100 - Rs.150.

The number of reward points offered on every expenditure of Rs.150 is also a major factor in choosing a credit card.

While some credit cards offer 3 reward points, other credit cards offer 5 points. There are some cards which also offers accelerated rewards of 10 points.

Security of the credit card

In today’s age where security and privacy are some of the biggest issues faced by the world, it is of utmost importance to know how secure your credit card is.

There are some cards which come with an EMV chip which marks them as highly secured. Even though your card is protected by passwords and PINs, it is not ‘safe’.

There have been many cases of fraudulent transactions and unsecured credit cards which has resulted in the loss of large sums of money. Hence it is advised that you speak to the bank representatives and understand the security of the card.

Checking the Terms and Conditions

Every reward point, cashback offers, discounts, etc. comes with several terms and conditions. Most offers on discounts come with a clause of minimum spends.

For example, if you spend Rs.1,000, a discount of Rs.250 is given on purchases.

Most people often do not read the terms and conditions which the credit card comes with. To understand it better, you can contact the customer care of the bank or visit the branch of the bank before taking the card.

These are some of the factors to consider before you choose a rewards credit card. There are a number of banks which offer credit cards with several rewards. To know more, it is advised that you research adequately or directly visit the branch of the bank.