Credit cards are now a common instrument used by most urban Indians and there are several benefits of using them. One aspect is the reward points that come along with the expenses made on the card and these can be used effectively to get additional gains. However, there can also be a loss of opportunity if the benefit is not taken properly.

Reward points

There are reward points available on the use of a credit card. The conditions are different for each card.

For example, there might be two points available for every Rs 100 spent on a card given by one bank, while some other bank might give only one point for every Rs 100 spent. This would determine the extent and manner of the accumulation of points.

Once a certain number of minimum points are accumulated, these can be used for redemption against various items listed and this can be a beneficial thing for the user.

There are also different categories of users identified by  the bank and when there are a lot of points accumulated on the card, then the user can move to the premium   category.

The premium category usually has more choice in terms of redemption gifts and a different point  structure.

Festive season

This is the festive season, with Diwali just around the corner. If there are a few specific gifts being considered, these could be got with the credit cards points accumulated.

For this, the catalogue or the list given by the banks would need to be considered and then points exchanged for the various items. In most cases, the card holder has to call the helpline number and then redeem the gift in exchange for the points accumulated.

This can result in a position where some of the items required are acquired from this source but a couple of points need to be considered.

One, some time needs to be given for the gifts to be delivered and this would vary from bank to bank and could take up to 10-12 days.

Two, there should be enough points to get what is specifically required and some gifts would require the use of points plus some monetary payment.

From the options available in the form of gifts, a wide range is available. Small household appliances used in the kitchen are available, along with vouchers for places that sell apparel.

Then, then there are items like direct to home connections and musical CDs or even vouchers at music stores.

On the home front, there are dinner sets and other cutlery items or vouchers at electronic stores and even charity can be done using this route, as the specified amount is donated to the specific area.

There are also branded items that can be purchased using vouchers of that particular store and the list here includes shoes, handbags, wallets, watches and even health checkups or hospital vouchers.

There are also vouchers of retail stores across the country and even vouchers of cafes and restaurants and magazine subscriptions. This is not an exhaustive list, as the items vary across banks and their different cards.

There has to be use of the points accumulated within a reasonable period, otherwise benefits can be denied.

There are sometimes conditions that require the points to be used within a specific period of time and if this is not done, then they could become useless.

The period could be something like two or even three years, but often a lot of people just forget about the redemption process.

The other thing is that if the card is to be cancelled, then the points will be worthless unless they are used up.

There can be another situation where the hit is not clearly available. This is when the number of points required to get a particular benefit changes.

Often, banks change the number of points required to get a particular gift by increasing the number of points for redemption. For example, if earlier a Rs 500 voucher at a retail store was available on redemption of 1,000
points, this can then be increased to 1,200 points.

This leads to a situation where a larger number of points are actually spent in trying to redeem a gift.

The writer is a certified financial planner