How to earn and redeem credit card reward points the right way
Reward points programme is one of the interesting features offered by credit cards. The programme allows credit cardholders to earn while they spend, making it a customer-centric feature. With credit card companies competing to offer more and more redemption benefits, the feature has become truly rewarding for customers.
Despite the popularity of reward points, some of us are still not sure about earning and redeeming them to get the maximum benefit. For all such folks, here are a few tips to make the most of credit card reward points.
How reward points work?
Even before knowing the tricks to use the reward points wisely, let’s first know how the reward points programme works. Though the feature varies from one bank to another and is known by different names, the concept remains the same.
Whenever a minimum purchase is made using a credit card, a certain number of points get credited to the cardholder’s account. The same points can be redeemed or exchanged for various rewards offered by the bank.
The minimum purchase and the number of reward points vary from card to card. Cardholders need to check with their respective banks or read the terms and conditions to know and understand the reward points programme specific to their credit card. Typically, for every Rs100 to Rs150 spent using a credit card, one reward point gets credited to the user’s account.
To become eligible for redemption, a cardholder needs to earn a certain number of reward points. The minimum eligibility again differs from one bank to another and from one card to another.
What can credit card reward points be redeemed for?
Once a user earns the minimum number of reward points eligible for redemption or more, he/she can exchange them for a variety of options including gifts, gift vouchers, annual fee waivers, charities, and others.
All gifts offered by a bank are included in its rewards catalogue. The catalogue, which is different for each bank, includes a variety of merchandise such as electronic gadgets, kitchen tools and appliances, home décor products, mobiles, personal care products, and a lot more. Every item in the catalogue holds a value that implies the number of reward points required to redeem the same.
Similarly, banks also offer gift vouchers of some clothing brands, air miles, cashback offers, option to donate, and other offers to redeem reward points.
How to earn more reward points in less time?
Even before thinking about redeeming reward points, credit cardholders need to earn enough to become eligible for reward redemption. Though our primary focus should not be on spending more to earn more reward points, we can customise our spending behaviour in a way that we can simultaneously earn reward points.
If you are planning to apply for new credit card, sign up for the one which offers reward points as a welcome gift. Banks usually offer 1,000 to 5,000 reward points as a welcome gift along with some milestone bonus rewards points which can be earned by achieving certain milestones set by the bank.
For all existing credit card users, here are a few ways to earn reward points on a regular basis.
■ Do regular shopping using your credit card: If you don’t have any outstanding debt on your credit card, then purchase daily needs including vegetables, milk, groceries, fuel and others using your credit card, instead of using your debit card or liquid cash. This helps you earn reward points on a regular basis. But make sure to pay your credit card bill on time, failing which you may have to face negative consequences.
■ Big-ticket purchases: Besides regular purchases, you can purchase big-ticket items such as jewellery, electronics, and travel tickets to earn points faster. As credit cards these days offer easy EMI options, you can convert your big-ticket purchases into easy instalments.
■ Automatic bill payment: Most banks offer the auto bill payment option. Once you have enrolled for this facility, your monthly utility bills such as telephone, electricity, and internet will be paid automatically.
■ Avail supplementary cards: If your spouse, parents, children or siblings need a credit card, you can apply for a supplementary or add-on card on your credit card, instead of going for a new one. The add-on card comes with similar features and benefits of the primary credit card. Hence, every expense on the card will again earn reward points. A maximum of 2-3 add-on credit cards can be availed on a primary credit card.
Redeeming reward points the right way
Once you have accumulated enough reward points, your task is to redeem them in a way that they provide maximum benefits. Here are some tips.
■ Choosing the right redemption option is the key: Most credit card companies allow you to trade your rewards points for free merchandise such as mobile phones, electronic gadgets, travel bags, kitchen appliances, and personal care products.
You may get tempted to claim those products for free. But, in fact, the redemption value of these items is terribly low. For instance, for an item worth Rs.2,500, you may have to shell out 5,000 to 25,000 reward points based on your card type.
Therefore, instead of opting for merchandise of low value, choose other options that will give you a higher value for your points. You can go for gift vouchers, charities, or annual fee waivers to get the most value. Charities give you the maximum value as all the points can be converted into cash, i.e., if you have 500 points you can donate Rs.500. However, the terms vary from card to card.
■ Don’t delay or miss credit card payments: Some credit card companies do not allow redemption of reward points when the credit card payments are not made on time. Besides the late fee, a penalty interest rate and damaged credit, you will lose reward points or air miles when you miss payments. Therefore, make sure to clear your dues on time.
■ Know the expiry date: The reward points typically have a validity period which starts from the date of accumulation. Once the validity period is over, the points will disappear from your account. Hence, make sure to redeem them within the validity period. Banks typically provide a validity period of 2-3 years from the date of accumulation.
■ Redeem the points before closing a credit card: One more mistake we tend to do is forgetting about the reward points before closing the credit card. As unclaimed reward points typically expire once the account is closed, make sure to redeem all your points before you cancel the card.
Well, these are a few tips you can follow to make the most of your credit card reward points. When redeeming gifts/gift vouchers, make sure your current mailing address is up to date. As the aforementioned rewards are typically sent to your registered address, make sure to update it in the bank records whenever there is a change.