In 2019, the year before COVID-19 hit the world, I travelled by air more than your average flyer. Internationally, I went to New York once to visit my sister, to Dubai twice to visit friends, and I also did short vacation runs to Sri Lanka and Thailand. Within India, I did 23 trips to Bengaluru, four trips to Chennai, and one to Guwahati. In all, my tickets cost nearly Rs 5 lakh, but here’s the kicker — I didn’t spend a single rupee on them, thanks to a judicious use of the reward points on my credit cards. How did I achieve this? Allow me to let you in on a not-so-secret trick.
While most people are aware of the negative aspects of credit-card spending, many people do not pay as close attention to the potential benefits that credit cards provide. Credit-card companies usually incentivise you to spend money, by offering various benefits. These can be broadly divided into two categories — cashbacks and reward points or miles.
We will be talking about rewards cards here — these cards give you rewards in the form of points or miles, which function like a currency and can be redeemed for various goods and services. In addition, a rewards card usually gives you a welcome bonus as well as a renewal bonus every year. On an average, credit cards have a rewards rate of about three-four per cent, though this can go up to 10 per cent or more in certain categories, or during promotions and sales. Thus, a spending of Rs 1 lakh will give you a minimum return of 3,000 (going up to 10,000 or more in the case of promotions) points. It is important to note here that the value of each point is not fixed and can vary depending on the type of card and the type of redemption you are making.
The opportunity to maximise these benefits lies in a smart allocation of your spends, depending on the specific offers available on your card. The best opportunities are usually in rewards cards, because they tend to have specific offers which can be "gamed", as it were.