Many credit card users, especially those who are regular shoppers, are considering cashback credit cards to save on shopping and also everyday expenses. These cards offer a percentage of your purchase cost back to you in cashback every time you use these cards. Some cards provide a flat-rate cashback across all categories, while some offer it for specific purchases or categories. Some cards offer a mix of both. Cashbacks are typically paid annually or monthly depending on your card type, which is directly applied to your Credit Card balance, reducing your monthly bill. However, most of these cards come with an annual fee and only with the right credit card, you will be able to get back the annual charges you pay for it.
Factors To Consider Before Getting a Cashback Credit Card
Choose The Ideal Type of Card: Most cashback cards in the market specialise in specific areas such as online shopping, dining, groceries, or fuel expenses. Determine which categories you spend the most and choose that particular spend-type card. For instance, e-commerce websites have co-branded credit cards that offer around 5 per cent cashback benefits for users, when you shop on their platforms. Further, these cards provide around the same benefits for purchases made on other partner merchants who are travel agencies, hospitality businesses, etc., like ClearTrip, PVR, Uber etc. Such cards can be considered for those interested in shopping, travel, and lifestyle.
If you are a foodie, food delivery businesses are offering cashback credit cards in partnership with banks, offering around 10 per cent cashback when you order food on their platforms, and considerable cashback on online spending across partner merchants.
Compare Cash Back Rates:
Assess the cashback rates and any limitations imposed based on specific spending. Look for cards that offer higher cashback percentages on essential expenses based on your needs. Be mindful of any caps on cashback earnings, as exceeding these limits may reduce your benefits. For instance, a cash-back credit card brand, offers 5 per cent cashback across all online transactions, irrespective of the merchant or platform you shop at but the maximum cashback limit (for the accelerated earning category) is Rs 5,000 in a billing cycle. It means online transactions up to Rs 1 lakh per month will be eligible for the extra earning, after which 1 per cent cashback will only be given on transactions.
Flexibility & Other Perks:
Examine the redemption options for cashback rewards, where some cards allow you to redeem reward points and later convert them into cashback. Some cards provide you cashback on all expenses, plus additional cashback on specific spending. Further, they may offer complimentary memberships, fuel surcharge waivers in fuel stations, discounts in restaurants, airport lounge access, etc. Therefore, one should compare the overall value back offered on different cards.
Compare Annual Fees:
Most importantly consider and compare any joining fees annual fees, or spending thresholds associated with the card. The annual fees of cashback credit cards typically range from Rs 500 to Rs 1,000, and some are pricier. A few ones come with zero annual fees.
Calculate whether the potential cashback rewards benefit you more than the costs and effort you put in to maintain the card. Several cards in the market refund you your annual fees if your total annual spend exceeds a particular threshold, which is usually above Rs 1.5 lakh.
Timely payments: Consider automating your credit card payments or setting up reminders to stay on top of credit card bills. Sometimes users succumb to the temptation of overspending just to secure the cashback, but end up accumulating Credit Card debt. Always remember to pay your Credit Card bills on time, or otherwise the interest accrued on the outstanding debt may wipe off any cashback earned.
