Cashback Credit Cards – All Your Need to Know Before Applying

Talking about cash back credit cards, they do offer reward points but the points can be redeemed for money instead of gifts and other rewards. Hence the name cashback cards.

Cashback credit cards offer cashback on most of the purchases made using the cards. Those who conduct their day-to-day purachases on credit cards can use a cashback credit card instead of regular one to enjoy more benefits.

While money back is one feature offered by cashback credit cards, there are other things about which one must be aware to get a best credit card. Continue reading to know about the types of cashback credit cards, things to consider while choosing one and other things which would be of great help for you in choosing a right card that suits your spending behaviour.

Types of cashback credit cards

Also called as money back cards, cashback cards are being offered differently by different banks and other financial institutions. To make it easy for you we have categorised the credit cards based on the cards offered by top credit card issuers.

The basic type of cashback cards are those which work like normal credit cards that allow cardholders to earn reward points on most of the credit card transactions. Once the points reach a certain number, they can be redeemed for cash, which will be credited to your credit card account. However, the value of each reward point may vary from each card to other. For instance, HDFC MoneyBack credit card offers Rs.20 for 100 reward points while the Freedom credit card offers Rs.10 for 100 reward points.

The second type of money back credit cards are those that offer cash back on certain transactions. In such cards, a percentage of the transaction amount will be paid back as cashback. The feature can be typically found in co-branded credit cards. For instance, HDFC Bank Bharat Cashback card offers 5% cashback on all fuel transactions, IRCTC ticket bookings, bill payments, etc.

You can choose a cashback card based on your frequent billers. If you are not specific about the type of purchase you make using your credit card but use it quite often, you can go for a cashback credit card that allows you to accrue reward points that can be redeemed for cash. On the other hand, if you frequently do certain transactions in high volume, you can choose a co-branded cashback credit card or any other cashback card that offers better value for your high volume transactions.

Be aware of cashback card terms and conditions

We agree that the money back offers on cashback cards sounds tempting. If you have decided to switch to a cashback card for all your daily purchases, that’s great. However, while choosing a card from a wide variety of cards offered by various banks, you need to look at a few things that would help you filter the card that provides maximum benefits. Let’s have a look.

Cashback Credit Cards - All Your Need to Know Before Applying
Cashback Credit Cards – All Your Need to Know Before Applying

Transactions eligible and not eligible for cashback: Not all the credit card transactions are eligible for cashback. This would be the case with most of the cashback cards. Hence, you must know the transactions eligible for cashback to make the most of it. For example, on most of the HDFC cashback cards only retail purchases are eligible for reward points. Other transactions that do not qualify for cashback are fuel transactions, cash advances, annual fees, wallet loading, and EMI conversions. Also, purchases worth less than Rs.150 are not eligible for reward points, therefore, no cashback on such transactions.

Hence, make sure to be aware of the transactions eligible and not eligible for cashback offer on your credit card.

Accelerated reward points: The more the number of reward points, the higher will be the cashback. One quick way to accumulate more reward points is to look for transactions that qualify for accelerated rewards. HDFC Freedom card, for example, offers 10 times more reward points on PayZapp and SmartBuy spends. Check the cards that offer accelerated rewards and see whether or not it matches your spending behaviour.

Value of reward points: For cashback cards that allow you to accrue reward points and redeem them for cash, you first need to check how many points you can earn per transaction. For instance, ICICI Coral Card provides 2 points on every Rs.100 spent. The best would be the card that offers a maximum number of reward points for less transaction value.

Further, you need to be aware of the exchange value of the accrued reward points. As each card comes with a different reward point value proposition you need to be aware of how much you can earn for every point you gathered. Continuing the above example of ICICI Bank Coral Credit Card, each reward point accrued on the card can be redeemed for Rs.0.25. The best cashback credit card would be the one that offers more cash for less number of reward points.

Redemption rules: Every credit card provider follows a set of rules for redeeming reward points. Two main things you need to know about redemption are the minimum points required for redemption and the minimum cashback limit per month. While some banks allow you to redeem the reward points with minimum cap, other banks require you to accrue more points before redemption. Further, they also set limits on how much you can avail as cashback per month. The cards that offer the least cashback per month may not be a right choice.

The validity of reward points: If you neglect this aspect, all your effort in earning the reward points goes in vain. Know the validity period of the reward points accumulated on your cashback credit card so that you can redeem them before they expire.

Well, these are the important things one must know before choosing a cashback credit card. By keeping the above-mentioned things in mind you can get the best cashback card that suits your credit card spending pattern.

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