Reward points are one of the most common benefits offered by credit cards. When used wisely, they can help you save big on the future bills. The rate of reward earnings differs from one bank to another and also from card to card. Say, if you have two SBI Cards, you could be earning double the rewards on one of the cards on the same expenditure and just half on the other. Since a lot of people in India are still trying to wrap their head around how credit cards work, the reward programs and how to earn and redeem them is still a mystery to many. In such scenario, it is common to make mistakes.
So, here we will talk about the common mistakes related to credit card reward points and how you can avoid them.
1- Not Keeping Track of Reward Points
This is a mistake a lot of us make. We think credit cards are only for making purchases and paying the bills; the rewards part goes unnoticed. Your credit card statement has all the details about the reward points earned during the cycle, points expired and the closing balance of the reward points you currently have. You credit card issuer is giving to all the information but it is up to you to take notice of it and track it. When you keep a closer watch on the ‘reward points’ part of your statement, you will know when is the right time to redeem the points. When you have multiple credit cards, keeping track may be difficult but it will definitely help you. You need to take advantage of the bonus opportunities that come your way and strategize your expenses for maximum gain.
2- Wasting Reward Points on Unimportant Things
Just because you can get that coffee maker for a few thousand reward points does not mean you should get it. Using your accumulated reward points for merchandise is the least profitable way of redeeming it. Redemption values for housewares, electronics and other such merchandise is terrible as compared to those on statement credit or transfer to airline programs. So, if there is an option to get a gift voucher against your points or to convert it into air miles, you should opt for one of these instead of getting merchandise. Read your credit card’s rewards catalogue, compare the options and choose the one you find the most useful.
3- Not utilizing the air mile conversion feature
A number of credit cards, especially the travel-centric ones, allow the card user to transfer accumulated reward points into the loyalty program of airlines such as JP Miles, KrisFlyer Miles, etc. Since the banks have to collaborate with these brands in order to bring forth such offers, the redemption value is pretty good for the users. If you are a frequent traveler, using reward points/air miles to pay for your air ticket is a great way to travel. If you can use a few hundred points to travel to your favorite location, it is always better than a voucher or a gift item. Sometimes, your card lets you transfer points into multiple airline loyalty programs. You can utilize this benefit to travel the world without having to spend a fortune.
4- Leaving the reward points to expire
Would you ever say no to your salary after the hard work you have done? Never, right! So why leave the reward points that you have earned in the account. Remember that reward points have a life of about 2 years and after that they expire so you must use them before their time comes. If you have accumulated the points for the purpose of redeeming it for something big, it is important to keep track of points in every statement. Most of the banks share the information about points that are about to expire beforehand. Take notice and proceed accordingly.
5- Spending only for earning rewards
The whole idea behind credit cards reward programs is to encourage the users to make more and more purchases. But you must remember that credit card is a type of debt and if you cannot pay the money back in full and on time, you will have to bear the high rate of interest. So, even if you get 10 times more rewards for a purchase that will not make any use for you, do not spend money on it.
It is easy to earn reward points but so is losing them. You can lose the accumulated reward points when they expire. If you default on the credit card payment, your rewards may get locked and you may even lose them. This is why it is important to pay attention to your reward point earnings. Also, the bank may choose to alter the terms and conditions related to your credit card reward points. If that happens, you may not be able to use the points or not as well as you would have thought. Read the fine print related to reward point usage and make wise purchases.
Reward points are meant to help the users but they are also meant to benefit the banks. To earn more rewards, you will have to spend more and when you spend more, the bank will earn more in the form of fees and charges. As a wise customer, you should understand this and make the expenses that you actually need to make. Smart use will make credit card reward points truly rewarding for you.