Do you know that now you can earn reward points not just on credit, but even on debit cards? Do you know that credit/debit card reward points expire if not redeemed on time? Or have you ever thought why do card companies give reward points for using their cards in the first place?
Explaining Debit/Credit Card Reward Points
Card reward programs are a bank’s loyalty program, and form an important element of their entire package that they offer to the consumers. Let’s understand how are reward points useful for card holders and why are they important for card companies.
How reward points work?
Every time a credit or debit card holder makes a transaction, the card company earns an ‘interchange’ fee from the merchant outlet. Apart from the ‘interchange’ fee, the card company also makes money from the annual fees on credit cards and interest on rolling balance. Card companies share a part of this earning with the card holder in the form of reward points to encourage them to spend and use their cards more frequently.
Factors that determine reward points earned
There are several factors that determine the number of points earned on a credit or debit cards. These include the transaction size, the type of card being used and also on where the transaction is being done.
Card variant:
Which card you hold is an extremely important factor in determining the number of reward points being earned and its value. For instance, on a basic card, a card holder earns one or two points for a transaction of ₹100-150. This figure can be three-five for premium, and even higher for super premium cards.
The higher the card variant, the more points one earns against the purchases made. For example, one of the Citibank cards offers 10X reward points to its card holders for shopping at exclusive partners.
Co-branded cards:
Generally, reward points on co-branded cards are higher than other credit and debit cards. Card companies take out co-branded cards in partnership with airlines, fuel companies and large retail or ecommerce stores.
When card holders use co-branded cards to make purchases at partner stores or outlets, they get accelerated reward points. For example, if one uses their airline card to make a purchase with that airline, they get get extra reward points and discounts for that purchase.
Merchant outlets:
Where one swipes their card also decides the number of reward points one earns. If someone is using their card to pay bills, they might earn lesser points compared to that at a restaurant.
Value of reward points
If your credit card bill shows 5,000 points against purchases made in the past one year, what is value of these points in monetary terms?
One reward point does not equal one rupee. The value can vary from issuer to issuer, and card to card. It can be as low as 10 paise per point and as high as ₹1 per point. The value also differs for each product / merchant you redeem the points at. Luckily, most of app tells you exactly how many reward points you earn on what merchant, for each particular transaction.
Accurate number of reward points you earn on spending at a particular merchant, according to the category of spend
One way of calculating the value of the reward point is by checking the price of the gift available against redemption. For example, a credit card company is offering ₹1,000 wrist watch against 5,000 reward points. Thus, each reward point is worth 20 paise. But again, that differs for each category, and subsequently each gift.
How to redeem Debit/Credit Card Reward Points
You can redeem reward points at any partner merchant outlet or website.
Most programs have started offering a range of options such as purchase of mobile phones, movie tickets, garments, home appliances and cosmetics, besides gift vouchers and donation to charities. However, you should choose the program that offers the most number of options.
Online redemption is the most convenient as it can be done without calling up the bank’s customer care department. Most banks offer home delivery for products purchased online against reward points.
You can also convert these points into air miles and use them to buy air tickets.
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Reward points come with expiry date
The latest development with reward points is that they now can expire after a period. The period can vary from one-three years. Usually, banks deduct the accumulated unused points at the end of every financial year.
Debit and Net Banking is rewarding too
Up until now reward points could be earned and availed only on credit cards. But in the wake of increasing number of transactions through netbanking and debit cards, banks have extended their loyalty program to these two modes as well. For example, ICICI netbanking and debit card transactions directly earn you Payback points.
Rewarding Indeed?
Reward points are an incentive for customers to use their cards as much as they can. Banks gain from the interchange fee from merchant outlets, which in turn gain from higher sales. The user of a card, especially a credit card, benefits if he uses it judiciously.
Want to know how many and what type of reward points can you earn per spend?