Reward points or cashbacks: What works better for the credit card users?

Regular credit card users tend to use their cards for a range of benefits, which include cashback and rewards.

Here, we give a lowdown on what matters more for the credit card users — are they cashbacks or reward points? Before proceeding further, let us first understand the key difference between the two. Cashbacks allow users to get some cash credited back to their cards when they make a purchase, and the reward point system sends points that can later be monetised for specified purchases, such as travel or hotel bookings.

How do cashbacks work?

Cashbacks allow users to receive some cash back to their cards when they spend at a merchant or online marketplace. If you are looking for simplicity, they are definitely better than reward points.

How do reward points work?

Reward points allow users to get some points in return, as per a set formula. For instance, ICICI Bank’s Coral Credit Card offers two reward points on every ₹100 spent on your card except fuel and one reward point on every ₹100 spent on utilities and insurance categories.

Some credit cards also offer points for achieving a milestone. For instance, the card mentioned above offers 2,000 reward points on spending ₹2 lakh.

These reward points can later be monetised to buy air tickets, hotel bookings or for buying items at merchants or online marketplaces.

Consider these before choosing a card based on rewards & cashbacks

I. Although almost all credit cards provide reward points for making purchases. It varies from card to card. Typically, high-value cards may have a better reward point system.

For instance, for every ₹200 spent, Axis Bank’s Shopping Reward Card offers 2 points, My Choice Card offers 4 points, and Privilege Credit Card offers 10 points.

II. Cashbacks are good for simplicity, since they offer direct monetary returns. It is recommended to look for the cards which have no redemption restrictions or minimum limits imposed.

III. Before opting for a card based on reward points or cashbacks, it is better to identify where you spend the most. And you should choose a card that offers higher rewards or cashback in those categories. For example, some cards offer 5 percent cashback on groceries or 3x points on travel.

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