>Be careful with how and where you spend, and make payments on time

Devendra Kumar saved Rs 200-250 on airline tickets from Mumbai to Raipur when he redeemed the reward points accumulated on his credit card. In his case, these were accumulated on a Payback card, linked to his ICICI Bank credit card. Dipen Kutty purchased a Nokia Lumia mobile phone worth Rs 9,000-odd for around Rs 6,000. The rest of the money was paid for by the reward points he had accumulated on his Citibank credit card, from other purchases. The trick is in knowing how the discount and reward schemes on credit and debit cards work and how to make the most of them.

Reward schemes

Credit and debit cards offer reward points through cash back, cash discount, discount on next purchase, air miles or frequent flier rewards, and fuel point rewards. Points can also be redeemed for gifts and merchandise. One can avail of discounts on credit programmes, which could be available on movie tickets or restaurants. Many of these discounts are also available for online booking and shopping.

READING THE FINE PRINT

Make most of credit card rewards

* Cash-back cards are good for those who prefer cash
* Use fuel cards only at petrol pumps of partners, at specific swipe machines
* Airline co-branded cards might not fetch you lowest priced air tickets as on travel portals
* Pay on time and in full to get benefits of reward points
* Check if redeeming the points involves charges Another method is real-time burn offers, which is redeeming the points instantly at the store. Several online stores offer real-time redemption, too.

How points accrue

The way points accrue varies from card to card. In general, card holders get one reward point on every Rs 150 spent. Apart from regular points, the card provider also offers bonus points. It could be for occasions such as the cardholder’s birthday, for the first time the card is used or shopping at a partner location. "While choosing a card, it is important to compare not only the reward points but also the redemption value of those reward points and opt for the one offering more benefit,’’ says Adhil Shetty, chief executive officer at BankBazaar.com. For instance, one card company or bank might offer one point for every Rs 100, while another might offer three points on every Rs 150 spent. Even rules for redeeming the points can be different. One airline card may offer one point equal to one air mile, while another could offer four points equal to one air mile.

Watch the fine print

"Reading the fine print and billing statements is the best way to stay up-to-date with any changes or developments in the reward system,’’ says Nitish Asthana, executive director, ICICI Merchant Services-First Data Corporation India. For instance, in case of many credit cards, the reward points accumulated can only be redeemed for purchasing their listed merchandise on their own website. This restricts the choice for the cardholder. In fuel credit cards, the points can be redeemed only at specific petrol stations and only when swiped at the EDC machine of that particular card provider. Sometimes, this is the condition for getting the accelerated or bonus reward points, too. So, you have to fulfill both conditions, of specific fuel pumps and using the specific machine for swiping to get the accelerated reward points.

In the case of airline cards, discounts might be available only if you book through the partner airline’s website and you could miss out on the lowest-priced air tickets available on travel portals. Reward points will not accrue if you are not regular with payments. If you’re one of those who’s always behind time with payments and have to pay late fees frequently, you might not get any reward points. Hence, a healthy payment record always helps. Expiry dates are another tricky condition. You might want to save your reward points to redeem against a big-ticket purchase you are planning. But in case of many cards, the points are available only for one year. If you don’t utilise it within that year, they will lapse. In some cases, there could be additional processing fees while redeeming the points.

Co-branded cards

Co-branded cards are typically offered by airlines and hotels. These offer accelerated rewards for purchases associated with the co-brand but standard rewards for other purchases. While choosing these, the emphasis must be on your preferences, lifestyle and purchasing habits. If you prefer the services of a particular hotel, like shopping at a particular retail chain or have a favourite airline, opting for a credit card co-branded with that specific hotel or airline allows you to get the maximum benefits. Watch for seasonal offers, cash-back programmes and rewards in the form of bonus miles. In the case of co-branded cards, the actual usage becomes more important. For instance, if not a frequent flier, it is not worth using an airline card because you will not be able to earn accelerated points. "The best way to get maximum benefit from your reward card is to first analyse your spending habits and then choose the credit card that works best for your requirement. If you are a frequent flier, you can opt for a card that offers air miles, whereas if you travel more by car, you can select the card with the fuel point reward,’’ says Shetty. Typically, the more premium the card is, more are the points you earn for the spends.

Cash back on cards

Cash back offers are good for those who prefer cash over merchandise. Very often, the rewards are automatically deposited in the account. Since cash back typically has a maximum limit, watch for this. While some card providers offer automatic cash back credit, in some cases the customer might have to apply for the cash back redemption. There is always some cost associated with this credit card. Hence, before choosing a cash back card check annual fees, conditions for waiver of annual fees and other charges.

Free or annual fee cards

Banks have stopped the practice of issuing free credit cards. The more the number of tie-ups and discount programmes the card offers, the higher is the annual fee likely to be. For example, air miles cards which offer access to premium airport lounges in India and abroad are relatively more expensive than those offering limited access to a few domestic lounges. Some card issuers refund the one-time fee levied if customers utilise a specified amount within a specific duration. In some cases, annual fee card holders also get additional benefits, such as an extended period for payments and even bonus rewards for those who are frequent travellers.

Use cards smartly

Having a good credit score is the best way cardholders can ensure they enjoy all the advantages of reward points. "Be vigilant about minimum redemption amounts and blackout dates. Card holders must also pay attention to what categories of rewards they sign up for and if signing up for bonus requires them to redeem in several increments, and so on,’’ says Asthana of First Data. And, if in the habit of carrying forward some dues to the next month, then select a card offering the minimum interest rate, says Shetty.