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How to make intelligent use of your credit card reward points?

Many first-time credit-card users are unaware of the optimum way of utilising their credit card points.

March 02, 2023 / 07:55 AM IST
With the rise in the number of credit cards, there has been an increase in lifestyle aspirations, demand for credit and the banks are introducing newer products.

With the rise in the number of credit cards, there has been an increase in lifestyle aspirations, demand for credit and the banks are introducing newer products.

The issuance and use of credit cards have accelerated since Covid-19 hit the country in 2020. In fact, almost every aspect of our daily lives have changed as a result of the pandemic, including consumer spending and shopping patterns.

Reports say the festive season helped credit card spending touch a record high of Rs 1.22 lakh crore in September 2022. With the rise in the number of credit cards, there has been an increase in lifestyle aspirations, demand for credit, and banks introducing newer products and fintech partnerships, giving rise to the now popular co-branded cards.

Access to credit apart, a primary reason for consumers opting for credit cards is the gifts, benefits, discounts, and other deals that come with them. Depending on the credit card, one can use its rewards program to earn points for purchases made in categories, including shopping, dining, bill payments, entertainment and travel. As one spends, one earns points that can be redeemed for a variety of rewards.

Today, co-branded cards have emerged as the new go-to payment method as they appeal to consumers across demographics and have an affinity for certain categories.

Numerous banks, merchants and fintech companies have introduced co-branded cards aligned to their target segment’s needs. These credit cards are tailored for individual needs – almost a card for everyone. Along with these customised cards come attractive reward point programmes that encourage different segments to avail of the benefits, making it a smarter approach to managing payments.

It is vital that credit card users are aware of the benefits that the cards come with. But many first-time credit card users are unaware of the optimum way to utilise their credit card reward points. It is important to note that the value of reward points and the redemption of points vary significantly from bank to bank depending on the type of card – from baseline to premium offerings. How to earn reward points:

Credit card reward points are automatically earned every time you swipe the card for a purchase. In most cases, the cardholder earns one point for every Rs 100 to Rs 250 spent on the credit card. In addition, the higher the value of your purchase, the more points you will earn.

However, the number of points you accumulate with every purchase will vary depending on the type of card you have and the issuing bank. A co-branded travel credit card, such as MakeMyTrip ICICI Bank Credit Card, will earn you more points on flight and hotel bookings than a regular credit card. Opting for multiple co-branded cards and using them for the specific categories they are tailored to will help you earn maximum benefits that you can redeem across the benefits ecosystem.

Here are some tips on how to maximise the benefits of your credit card reward points:

  • If you spend money on your credit card within the first 90 days of its issue, some banks offer you welcome points. Spending on specific categories, such as shopping at partner stores, dining experiences and entertainment, earns you accelerated reward points. You can leverage these points to make better spending decisions.

  • Stuck for gift ideas this holiday season? You can redeem your points for e-vouchers or gift cards. This way you give the recipient the choice of buying what he or she desires. You can also choose to shop through a range of categories on the card issuer’s rewards portal or save a lot on airfare and hotel accommodations via reward points and air miles. Some banks even offer the option of making donations through reward points.

  • Be aware of when your points expire and ensure you redeem them before they do. It is wise to keep a record of the credit card rewards points before they expire. Most banks provide a dedicated portal for tracking points and making purchases off the portal or the bank’s official app itself. Keeping track of this can be very useful when you go shopping, buy air tickets, etc. To simplify this, there are some cards in the market that offer additional rewards for hitting a spending milestone annually. Hence it is wise to concentrate purchases on one or two cards to maximise rewards.

Benefits of Credit Card Reward Points

From hotel bookings to flight tickets to charity contributions, cardholders are spoilt for choice when it comes to choosing ways to redeem their reward points. They can plan their next holiday, overhaul their wardrobe or stock up on groceries. They can browse extensively through catalogues to make their choice and find the best option for their points. Therefore, it is pivotal to first select the right credit card by comparing different cards and choosing one that offers the most benefits suited to one’s lifestyle and spending patterns.

If one is a smart credit card user and understands the credit card ecosystem and its benefits, credit cards can be a smart way to manage one’s expenses and get the most out of them. It helps the user to build a learning curve to cope with finances in a more responsible manner and have a risk-free expense management experience.

Ramakrishnan Gopalan is VP and Head of Products & Solutions for India and South Asia, Visa
first published: Mar 2, 2023 07:55 am