Are credit card reward points really worth it? Here's what you need to know

Credit cards are an integral part of the financial lives of most Indians today, bringing convenience and several advantages, including reward points. Reward points are highlighted as one of the key advantages but the question that has to be taken seriously is: Are they worth it?

It is important for card users to understand their card usage needs, rewards, credit utilisation ratio and overall expectations. So that they are able to actually realise how impactful and worthy the credit card reward points are?

How has been the credit card spending in India recently?

It should be noted, according to a detailed report by Asit C. Mehta Investment Intermediates limited that, in January 2025, card spending declined 2% month-on-month (MoM) to ₹1.8 trillion while increasing 14% year-on-year (YoY). Transaction volume declined 1% MoM to 430 million, the report went on, and continued to decelerate due to increased wrongdoings.

Apart from that the report further detailed that, average spend per card fell 1% MoM to ₹16,911. Outstanding cards fell to 109 million with 1.2 million cards withdrawn. HDFC, SBI, and ICICI maintained their market supremacy, while Kotak Mahindra Bank rejoined the marketplace after being debarred for 10 months. Therefore, eventually it is always prudent for card holders to keep a check of their credit profiles and credit scores. 

Further, in such a rapidly evolving environment it is critical for credit card holders to distinctly comprehend their own credit card facilities, reward points and related conditions.

Credit card reward points: Concept, meaning and uses

Reward points of credit cards are rewards given by banks to induce spending on their credit cards. For each purchase, the cardholders are awarded a fixed number of points redeemable for any reward like: merchandise, holiday travel, cashback, or gift certificates. The redemption value of such points can range very extensively depending on the issuing bank of the credit card and the redemption method.

Evaluating the value proposition

While reward points can seem appealing, it's important to evaluate their actual worth. A few things to consider are:

• Redemption options: Reward points often vary in worth based on the type of redemption. For example, redeeming points for merchandise could yield less value than redeeming for travel or cash.
• Charges and fees: Certain credit cards with great reward schemes have large fees. You have to figure out if the rewards are worth paying the fees.
• Expiry dates: All reward points expire, and you must use them within a certain timeframe. Unused points will expire, becoming worthless.
• Spending behavior: The value of reward points is based on your spending behavior. If you don't spend enough to accumulate a large number of points, the rewards won't be valuable.

Maximizing reward points

If you choose to sign up for credit card rewards, these tips maximize their value:

• Selecting the right card: Select a credit card that suits your spending behavior best and rewards you the best for your typical purchases.
• Redeem wisely: Choose redemption offers that offer the most value for your points.
• Monitor expiry dates: Mark down when your points are expiring and use them before that.

Therefore, credit card reward schemes can be rewarding but can also make you spend more and end up in debt. You must use credit cards wisely and settle your balances on time to escape high interest charges and damage your credit score. Relaxed and casual use can result in debt traps that can create a giant financial burden. Spend only what you can refund.

(Note: Using a credit card carries its own set of risks)