3 MinsMar 1st, 2021
Amrita Mestry, 28 works for a multi-national company and is planning to apply for a new credit card. She can choose between a reward-points card and a cashback credit card. Amrita is a little confused about which card to choose.
Aren't all credit cards basically the same?
Yes and no. The essential features remain the same – ease and convenience of payments, the ability to spend now and pay in the month. It is in their additional features that credit cards tend to differ. Some offer reward points, others special deals and discounts, and still others offer cashback on spends. To maximize the benefits, a customer needs to understand which one suits him or her best.
So, what's a cashback credit card?
Every cashback credit card is unique, but the one common benefit they all offer the customer is the same: You get some cash back from every rupee you spend. Some offer a fixed amount of cashback, for example, 1% on total purchases. Others might provide higher cashback on specific spends like fuel or groceries.
Amrita plans to use her credit card for shopping for groceries and other essentials as well as paying utility bills. It then makes sense for her to opt for a cashback card. Look at it this way; her monthly spends would easily total up to Rs. 15,000. Even a 1% cashback means she will get Rs. 150 per month. Over a while, this would add up.
Does this work on every spend?
Generally, it does. Amrita's recurring spending would include paying utility bills, buying groceries, watching movies, etc. A cashback card will ensure that she gets money back on every purchase. Cash backs, however, don't work in case Amrita withdraws cash on her card.
What other benefits can one expect from these cards?
Some cashback cards have tie-ups with certain grocery chains or franchises that offer a higher cashback rate. These returns could be as much as 2-4 times the regular cashback you get. So it makes sense to shop or fill fuel from these brands. Some of these cashback cards also come with a sign-on bonus. For example: If Amrita spends over a certain amount in the first 2-3 months, the cashback rates are higher for those months.
[Also Read: How To Apply For A Credit Card Online And Enjoy Best Deals]
How are these cards different from regular reward cards?
In the case of a reward card, Amrita would need to accumulate and redeem her reward points, while with a cashback card, she would get the cashback in the following month's bill. Another difference is that in some cards, reward points come may have an expiry date. If you fail to redeem within that date, they may expire. That is not the case with cashback cards. With a cashback card, Amrita makes money on every swipe.
Do these cashback cards have annual fees?
Again, yes and no. Some do, and some don't. But generally, cards with annual fees tend to offer higher cashback. If Amrita opts for a cashback card with yearly charges, she should spend enough to recover at least one fee amount.
Axis Bank offers a range of Cashback Credit Cards to suit the varying needs of its customers. To find out more visit the website.
Disclaimer: The Source, a Mumbai-based content creation and curation firm has authored this article. Axis Bank does not influence the views of the author in any way. Axis Bank and The Source shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.
