Spend wisely and earn more on credit cards

Most credit card companies have launched attractive rewards schemes in recent times. This is primarily because of increased competition in the market that has forced these companies to come up with innovative plans to entice the potential customer to use their cards more often. The basic idea is to sweeten the deal that you do not feel the pain while spending through a card.

In such rewards programmes, you are awarded certain points for every Rs 100 you spend on your card. This could vary from half a point to 5 points, depending on your type of card and the amount spent.

As the amount spent increases, your entitlement to the number of points per Rs100 spent also increases. An example of ICICI Bank cards on reward point entitlement (See Rewards of Spending).

These reward points can be collected and redeemed in various ways- against merchandise, apparel, personal care products, dining, entertainment, magazine subscriptions, gift vouchers, charity, annual fees on your credit card, frequent flyer miles of an airline along with its international partner airlines, or you can get cash back on them.

There are broadly three types of credit card users. The first are the very conservative ones, who are wary of using credit cards except in emergencies and who possess a maximum of one or two such cards.

The disadvantage here is that you are entitled to redemption against credit card reward points only after you have collected a minimum amount of points, which is generally 500 points for most card companies. Such rare spenders take a lot of time to build up a substantial points balance.

The second kind are at the other end of the spectrum, are compulsive shoppers and rely heavily on credit card debt to get by and often get delayed or default on their payments.

The flip side of this is that most credit card issuers do not allow points on over-limit purchases and redemption is not allowed if payments are overdue, or the card account is closed due to bad payment or credit history.

The third are the more balanced ones, who take maximum advantage of the facilities their cards offer, while being wary of the catches in the fine print.

You too can spend wisely and earn more on your credit card/s. Here are a few tips to do so:

If you and your spouse have separate cards, change this to a consolidated one, by making one card as an add-on to the other, so that when either of you spend on them, the points will be accumulated together.

Try and make most of your regular purchases using credit cards. This will entitle you to more reward points and will also give you an interest free credit period within your billing cycle.

All transactions on your credit card are not eligible for reward points, such as: cash withdrawals, interest charges, card fees, balance transfers, demand drafts, service charge transactions, among others.

You should also look for hidden costs associated with the redemption. For example, some banks levy a delivery charge for the items, which is debited to your credit card, while some provide this as a free service.

Certain banks allow instant redemptions at retail stores that are their rewards program partners. You should avail of this as it allows you to avail of a wide range of products not contained in the redemption catalogue, and that too without having to wait for their delivery. For example, Citibank allows this facility at Shopper's Stop, Landmark, Westside and Satya Paul. ABN Amro also offers this facility at a large number of retail outlets.

Premium cards have a higher point redemption value than normal cards. For example, while Citibank Platinum card provides a redemption value of Re 1 per point, it is 65 paise per point for the Gold card and 50 paise per point for the Silver card.

Thus, if you are a big spender, it pays to upgrade your card. To sum up, a sensible approach towards spending coupled with some number crunching can make the usage of your credit card a truly rewarding experience.