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What You Should Know About Reward Points On Credit Cards
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How Do these Reward Points Work?
Credit card issuing banks usually award you a point when you spend a certain amount of money with their card. This can vary from Rs 40 to Rs 100 depending on the bank (which issues the card) and where you buy it. This means that on every Rs 40 you spend, you get one reward point. So if you went on a shopping spree, spent Rs. 6000, and put all the payment on one credit card, you would have collected 150 reward points.
This does not mean that 1 point equates 40 or 100 rupees or even that 1 point is equal to 1 rupee, when you want to redeem it against products. A certain bank, for instance, offers an Rs 1000 item in exchange for 5000 rewards points. This means that a point is worth 20 paise.
As I said earlier, what and where you buy affects the points you earn. If you eat at a five-star restaurant, you are bound to accumulate points faster than you would by paying your utility bills.
That is because the card issuing entity has an arrangement called an interchange fee with various merchants. This obviously differs from establishment to establishment. Some merchants may pay the card company a higher fee to induce more sales.
Co-branded cards offer higher rewards for each rupee spent. Co-branded cards are those used expressly for a specific purpose – for example air tickets, fuel, etc. If you use your car regularly or you fly frequently the credit card company benefits from it and you also get to collect more reward points. A dip-stick survey shows that rewards points with co-branded cars can vary from 5 to 10 times of that from other ordinary cards. With co-branded cards you can also avail of discounts on purchases.
Credit card companies often use reward points as a selling point when they are trying to sign you up as a customer. Rewards points should not the reason for getting a credit card, however attractive the offer.
However as a customer and especially if you are in the habit of using credit cards often, I would suggest that you should take full advantage of the benefits and get them redeemed frequently. Look for cards that offer you a wide range of options in terms of what you can buy – apparels, accessories, gift vouchers, consumer electronics, home appliances, air miles, furnishings, etc.
You can redeem these points both online – on the site of the card company and if you have an online account with them – or by calling them up. These products are delivered free-of-cost to your home.
Therefore, next time you get your credit card statement look hard at your reward points and start shopping!
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