Credit cards are popular and for a number of reasons. They come with a host of benefits beyond just easy access to credit during lean times. From maximising the value of your spends to offering freebies and special discounts that little piece of plastic can work wonders when used smartly.
However, it’s important you have complete clarity not just on the many benefits your card might offer but also the cost of availing them. Becau-se responsible borrowing is the foundation of savvy credit card usage. Also, it makes a lot of sense when you choose a card whose benefits are in line with your unique spending habits and budget.
To help you make informed choices, here's a list of seven interesting credit card benefits that you should be aware of:
REWARD POINTS
Among the biggest draws are undoubtedly the reward points that credit card use offers. Depending on the card variant, you as a cardholder can earn anywhere from 1-5 reward points each time you pay with your card. These accrued reward points can, in turn, be redeemed for gift vouchers or items from dedicated ‘reward catalogues’, based on the issuing bank.
Keep in mind:
Banks often levy a fee each time you redeem your points (which could range from Rs 50 onwards).
There could be restrictions on the categories that reward points can be redeemed against.
AIR MILES
In addition to regular rewards, some cards offer air miles against card use. If you are looking to subsidise your travel costs, these accumulated air miles can be redeemed for discounted (or even free) flight tickets, free seat upgrades, deals on hotel bookings and shopping, etc., depending on the number of points.
Keep in mind:
Different card variants come with varying rates at which you can earn/spend your miles, so it’s advisable to check the fine print.
While you can redeem points against the base ticket cost, taxes and surcharges are often not covered.
Check airlines and the miles conversion cost. Carr-iers have differing miles conversion rates, and some might have blackout dates.
JOINING BENEFITS
To entice applicants, some cards come with joining benefits in the form of bonus reward points or gift vouchers. Also called sign-up bonuses, these perks could also include joining fee waivers or reduced interest rates.
Keep in mind:
There could be a minimum spend amount to unlock benefits like a reduced interest rate. The reduced rate could also be time-bound, after which you could end up being charged a much higher rate.
In the case of reward points, there could be caps on the redemption rate for the free points.
CASHBACK
A number of credit cards nowadays offer cashback against eligible spends charged to them. For example, you could receive five per cent of the amount spent as ‘cashback’, which will be credited to your card. When used wisely, you can recover a significant portion of your card spends through cashback.
Keep in mind:
Cashback could be restricted to certain categories and require a minimum spend in order to be applicable
The amount you can receive as cashback could be capped per bill cycle, depending on the card variant
COMPLIMENTARY INSURANCE
A majority of credit cards come with complimentary insurance, ranging from life cover to international travel cover. While this would depend on your card variant, such extras can put your mind at ease and save you a tidy sum, in the event of an unfortunate situation. Credit cards offering travel insurance are among the most sought-after since they cover a wide range of travel risks at no extra charge.
Keep in mind:
There could be a minimum spend requirement to avail risk cover.
Exclusions or riders, such as pre-existing medical conditions (for travel health cover).
PURCHASE PROTECTION
Most cards come with purchase protection, which covers new items against damage, loss or theft for a certain period of time. If you've made a big-ticket purchase that isn’t covered by warranty, you can file a claim for the amount spent if the item was accidentally damaged.
Keep in mind:
There are usually caps on the payouts based on the card variant and issuing bank.
Payouts would depend on the item purchased and could have additional conditions limiting protection to only locally bought items, for example.
0% EMIS
Often advertised aggressively, most credit cards offer ‘0% EMIs’ on eligible big-ticket purchases. Whether in collaboration with e-commerce platforms or retail chains, this remains an attractive draw and could save you a significant amount in interest payments apart from the convenience of breaking a big expense into bite-sized instalments.
Keep in mind:
Extra fees such as taxes and other subsidiary charges are levied on the total purchase cost.
There could be hidden charges relating to the purchase and hefty penalties for defaulting on monthly payments.
So, explore your credit card benefits and make the most of your expenses. But you’ll be well-advised not to breach your budget to avail certain benefits, like maximum cashback or reward points. Because, ideally, a credit card should help you save more, not spend more.
— The writer is CEO, Bankbazaar.com
