Credit card rewards: Smart perks or spending trap?
We’ve all heard someone rave about free flight tickets or cashback on groceries thanks to their credit card. But is it really that easy—or is there a catch?
How credit card rewards work When you swipe your credit card, the bank earns a small fee from the merchant. A portion of that is returned to you in the form of rewards—usually as points, miles, or cashback. The idea is simple: the more you spend, the more you earn. But that’s also where the trap lies. To get the most from these perks, you need to spend smart—not more.
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Types of rewards you can earn Most cards offer reward points, cashback, or travel perks. Some give you lounge access, discounts on fuel, or even gift vouchers. Premium cards go a step further with concierge services or international hotel benefits. But each card is designed with a specific kind of spender in mind. A travel card may give more points on airline bookings but very little on groceries. A cashback card might work better if you spend mostly on daily needs.
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Are you paying more to earn these perks? Here’s the thing most people overlook—rewards only make sense if you’re not paying interest or fees. The average credit card interest rate in India is over 36% annually. So, if you roll over even a part of your bill or miss a payment, any cashback or points you earn will be wiped out by the charges. The same goes for cards with high annual fees that you don’t use enough to justify.
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How to actually benefit from your card To make your credit card work for you, treat it like a debit card. Spend only what you can repay in full every month. Look for a card that matches your lifestyle—don’t get a luxury travel card if you rarely leave town. And check the terms closely: some cards offer “up to 5% cashback,” but only on certain categories or after hitting spending milestones.
Don’t fall for the rewards trap Credit card companies love customers who chase rewards and overspend. That’s where they make their money—from late fees and revolving interest. If you find yourself tempted to buy something just to earn points, pause. You’re not saving money—you’re spending more to get back a little. True benefit comes when you get rewarded for the spending you were going to do anyway.
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Use them wisely Credit card rewards can be great, but only if you use your card wisely. Pick the right card, pay on time, and avoid the urge to swipe for things you don’t need. That’s when rewards really feel like a bonus—not a bait. Used with discipline, your card can give you more than convenience—it can actually stretch your budget a little further.
