Credit Cards have lately become the alternative for payment and transactions as they give new incentives, reward points, and cashback to the user. Reward points and cash back are the two main benefits that the customer looks for. Both have their advantages, but the customer chooses among them on the basis of their purchasing habits, personal choice and their personal requirements. As there are multiple options available in the market for credit cards, the user gets confused about which credit card to choose. Before deciding which credit card to choose, i.e. whether Axis Bank Neo Credit Card or Axis Bank MyZone Credit Card, the user should understand in detail the comparison of cashback and reward points. Below is a detailed comparison of both.
CASHBACK CREDIT CARDS
Cashback credit cards are cards that basically offer some portion of your transaction amount back to you. It will vary from card to card but will basically depend on the spending category of the user. Some of the credit cards are co-branded and will provide cashback in a partner merchant wallet.
For example, cashback given by Amazon Pay ICICI credit card is credited as Amazon Pay balance. But in some credit cards, cash back is directly credited into a credit card account.
Features and Benefits
- Simple Management – Cash back is the most convenient way to calculate the value you have received back, unlike reward points, where you have to check and find the best options available for redemption of the cash back you earn. In reward points, there are various rebate values which depend on redemption methods, but in cash back, values remain the same. So, it becomes easy with cashback to calculate total card returns and their management.
- No Expiration – Cashback offered to the user does not have any expiration date but rather comes up with lifetime validity. So you don’t have to redeem it in a certain time.
- Hassle-Free Redemption – As cashback is automatically credited into the account, you don’t need to read any catalogue like in reward points. One has to read the reward points catalogue and understand what will be their value after redemption.
- High Redemption Value – Generally, credit card providers offer a fixed amount of the portion of the transaction the user has made; it does not vary. Unlike reward points, to redeem reward points, you have to consider the point-to-cash conversion ratio.
Limitations –
- No Notable Redemption Benefits – Since the value of cashback is fixed, the user will not get any chance to get any privileges or incentives like buying any items from partner merchants at a lower cost. So cashback limits your redemption options, due to which users don’t get any chance of getting any incremental rewards.
- No Bonuses – Cashback credit card providers do not offer any cashback bonuses as one gets in reward points cases. In the case of reward points, one will get milestone benefits, I.e. reward points for reaching certain spending milestones. For instance, cards like Axis Bank Magnus Credit Card, and Axis Bank Neo Credit Card offer reward points bonuses.
- Limited Deals and Offers – As the cashback is directly deposited in your account, users don’t get an opportunity to earn discount vouchers or products that are available in the reward catalogue. These offers are bought on discounted offers when bought against reward points.
Rewards Credit Cards
Rewards credit cards are cards which offer excellent reward programmes to their cardholders on their purchases. There are some credit cards that offer accelerated reward points on certain products, for example. Simply Click credit card normally offers 1 reward point on 100rs spent but offers 5X on offline spending and 10X on spending with shopping partners. These reward points can be redeemed later by the cardholder to buy discounted vouchers or any other items according to the reward catalogue.
Features and Benefits of Rewards Credit Cards
Below mentioned are some of the important features and benefits of Rewards credit cards –
- Conversion to Partner Loyalty Points – With reward points credit cards, there is one added advantage: users can convert their reward points into loyalty point programs of their credit card partners like Club Vistara or Air Miles. For example, Yes First preferred credit card gives cardholders the opportunity to convert their earned reward points into Club Vistara points. Based on the type of card you have, you can utilise it later to make travel-related discounts.
- Bonus Points – Several cards offer substantial bonuses to the cardholder, such as joining bonuses or bonuses for achieving milestones.
- Exclusive Offers – You can earn discounts and brand vouchers by redeeming your reward points. These offers are generally written in reward catalogues in collaboration with certain categories.
- Inflated Redemption Value – There are many reward credit cards that come up with a greater redemption value. For example card, cardholders will be able to buy a certain product at a much lower price by redeeming their reward points.
Limitation –
- Limited Validity – Most credit cards that come with reward points have a certain expiration date. After that date, their validity expires, and they are of no use.
- Different Reward Programme – Each credit card provider comes with their own credit card programme, which makes it difficult to manage and maximise their credit card returns.
- Redemption Charges – Most credit card providers charge a certain amount of fees on reward redemption, thus making the whole process a costly affair.
- Restricted Reward Redemption Option – The reward catalogue usually provides restrictions or limits the product option against which the cardholder can redeem the reward points. Some cards also allow you to redeem points against your statement balance, although the cash worth of the reward points is rather low.
How to Make a Final Choice?
To decide which type of card to use, you should know for what purpose your card will be used. If you want to spend on movie tickets and fuel expenditure, then a reward card will suit you as you can redeem your points. On the other hand, if you are thinking of spending on multiple categories, then other options will suit you.