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Credit cards help you save significantly on your spends primarily through cashback or reward points—two of the most popular benefits among cardholders. With a cashback credit card, you can get direct value back, while reward points can help you fetch free flights or hotel stays.
Therefore, it is important to analyze your spending behaviour when you apply for a credit card to make the most of it. Let’s take a closer look at cashback vs. reward points to help you make an informed decision.
Difference between Rewards & Cashback Credit Cards
Both types of credit cards are designed to help you save on everyday expenses, whether at a physical store or online. Here’s how both cards differ from each other:
With cashback credit cards, you receive a fixed percentage of your spending back, typically as a statement credit or check, making it a straightforward way to earn value back each time you make a purchase. Whereas reward credit cards allow you to accumulate reward points on your purchases, which can later be redeemed for your card spends.
Cashback cards often come with minimum transaction requirements to earn cashback and usually have a maximum capping on the cashback you can earn. On the other hand, reward credit cards typically offer 1–5 points for every Rs. 100 to Rs. 200 spent, which you can later redeem against various options.
The process of redeeming cashback is also different from reward points. Cashback is credited directly to your account or as a statement credit. In contrast, reward points are offered as points or miles, which you can accumulate and redeem against travel, shopping, or other spends.
Unlike cashback, most reward points come with a validity period, under which you are required to redeem your reward points. Usually, this validity period ranges between 1 and 2 years. However, super premium cards with high annual charges offer reward points with no expiry date.
How do rewards and cashback credit cards benefit you?
Reward credit cards allow you to earn reward points, miles, or other types of rewards with every transaction. For frequent travellers, these cards can help you earn complimentary flights, hotel stays, or upgrades—offering significant savings on travel expenses.
Cashback credit cards, on the other hand, offer straightforward benefits by returning a percentage of your spending directly to your account. Unlike rewards, cashback is immediately credited, which can also be redeemed toward your credit card bill, making it a practical choice for those seeking immediate savings.
Cashback Vs. Rewards: Which one to choose?
Reward credit cards are ideal for frequent travellers, as they can accumulate reward points and redeem them against Airmiles, hotel bookings, products, vouchers, and more. These redemption options can significantly reduce travel expenses by offering free flights or hotel stays.
In contrast, cashback credit cards offer direct savings, giving cardholders a percentage of their spending back as cash credit, making them a reasonable choice for those seeking immediate savings or a way to pay off their card balance.
Ultimately, it’s important to evaluate each card’s features and benefits to ensure it aligns with your lifestyle and spending habits, and then make an informed decision.
Related Read: Rupay credit cards on UPI will now earn same reward points like other RuPay cards including on these UPI transactions
