Cashback Credit Cards Vs Reward Credit Cards

If you are looking for credit cards, you have definitely come across cards that give rewards in the form of rewards points or cash back. Most people only use credit cards to take advantage of offers and discounts. Some credit card users favor it due to the cashback and reward points it offers. However, it is crucial for you to know the differences between credit card cashback and reward points, and which one of them is better.

CASHBACK CREDIT CARDS

Assume you have purchased an electronic item for Rs. 40,000 with your credit card, which has a 10% cashback offer on electronics with a minimum transaction of Rs. 30,000. You will then receive a cashback of 10% which amounts to Rs. 4,000. At the time of the transaction, you will pay Rs. 40,000, and the cashback will be added to your account. Depending on the deals, the duration to receive cashback could be different.

The most common reason why so many people prefer to use credit cards when shopping both online and offline is credit card cashback. Typically, if you use your cashback credit cards to make a purchase from any merchant and are qualified for a cashback, you will receive a portion of your purchase price back. The merchant is required to return a portion of each purchase’s price to the credit card company. The bank then decides to give the consumer a share of these profits. Cashbacks offered by various credit card companies vary.

Benefits of Cashback Credit Card

1. The majority of the best cashback credit cards function without levying even a small fee on you.
2. Cashback rewards are directly credited to your account without a time limit and are available to be used at any time.
3. For a short period, several cash-back credit cards offer 0% APR on purchases or balance transfers. This will enable you to settle a large purchase or outstanding debt without accruing interest.
4. Many cash-back credit cards provide an introductory bonus if you spend a minimum amount over the first few months.

Disadvantages of a Cashback Credit Card

1. The total amount of cashback incentives a consumer can receive from the credit card company each year may be limited.
2. Some of these cashback incentive credit cards may initially have 0% APR, but after the mentioned period, they may charge as much as 30% APR, which can pile up significantly and cause consumers who carry a balance severe financial harm.

Best Cashback credit cards

Axis Bank ACE Credit Card:

• No limit on the amount of cashback.
• Get 5% cashback using Google Pay when you pay bills (such as those for gas, electricity, internet, etc.), for DTH, and for phone recharge.

Citi Cashback Credit Card:

• When users use this card to pay for cinema tickets, utility bills, or phone bills via Citi Bill Pay or Citibank Online Payments, they can receive 5% cashback.
• The consumer will get 0.5% cashback on any other purchases.

Flipkart Axis Bank Credit Card:

• Up to 5% cashback on purchases made on partner websites like Flipkart, Myntra, and others.
• Users will receive 1.5% flat cashback on all other purchases.

Standard Chartered Manhattan Platinum Credit Card:

• When you shop at supermarkets, you get 5% cashback up to Rs. 500.

REWARD CREDIT CARDS

If your credit card offers 3 reward points for every Rs. 150 spent on electronic products, and you have spent Rs. 40,000 on an electronic device, you are eligible to earn 800 reward points. You can later use these rewards to purchase any item through the reward point redemption page of your specific credit card.

Every time a user makes a purchase with Reward Credit Cards, they can get reward points. You will often accrue more points for larger purchases compared to lesser purchases.

Benefits of Reward Credit Cards:

• The main benefit of reward points is that you can use them to get discounts when you shop. You can use reward points to get refunds and discounts on purchases once a particular amount of points has been acquired.
• From the rewards on your credit card, you can purchase gift cards.
• Several banks let you donate your reward points to various charities.
• Reward points can be converted into cashback.

Disadvantages of Reward Credit Cards:

• There is a deadline for using all redeemable points.
• A certain minimum threshold value is typically set by some credit card issuers before you may redeem your reward points.
• Redeeming reward points also comes with a remittance cost. The reward transaction will be processed and handled for a nominal fee.

Best Reward Credit Cards:

SBI SimplyCLICK Credit Card:

• When you shop online at select stores like Amazon, Cleartrip, BookMyShow, FoodPanda, UrbanClap, and Lenskart, you can earn 10 times as many reward points.
• Get 5x rewards on all of your additional online purchases. 
• With this card, you will get 1 Reward Point for every Rs. 100 spent.

HDFC Bank Diners Club Black Credit Card:

• For every Rs. 150 spent on retail purchases, earn 5 reward points.
• Reward Points up to 10X on SmartBuy Purchases.
• Reward points can be converted into air miles at a 1:1 ratio.

SBI Card PRIME:

• Every Rs. 100 you spend earns you 2 reward points.
• 5X Reward Points for eating out, shopping at department stores, and going to the movies.
• Spend Rs. 100 and receive 15 reward points at retail and online landmark stores.

IDFC FIRST Select Credit Card:

• Enjoy 1 reward point every time you spend Rs. 100.

• On your birthday, all purchases will earn you 10X the usual reward points.
• The reward points accumulated on your credit card have no expiration date.

 

Here is a Table to sum up the comparison

CASHBACK CREDIT CARDSREWARD CREDIT CARDS

	CASHBACK CREDIT CARDS	REWARD CREDIT CARDS
Welcome benefits	When you activate your credit card, you won’t get any cashback.	Some credit cards provide new customers a bonus of reward points they can use for future purchases.
Limit	Cashback can only be earned up to a certain amount per deal and brand.	The amount of reward points you can earn is unlimited because they increase with each transaction you complete.
Redemption	Since the cashback are directly credited to your account, there is no need to redeem them.	The reward points need to be redeemed by making purchases from a variety of categories on the bank’s online store.
Validity	Cashback has no expiration date because you can use it whenever you want after it has been added to your account.	Depending on the bank, the reward points are good for a couple of years until they expire.
Where can you use them?	You can use the Cashback money wherever you like to make purchases once it has been credited to your account.	Only items that are offered on the bank’s shopping websites may be purchased using reward points.

 

Bottom Line

This question as to which one is better does not have a single correct response. The best possible choice for you will depend on your circumstances, spending habits, the kind of rewards you value, and, to some extent how much time you are willing to put into learning how to use the benefits offered can all influence the optimal course of action for you. 

Additional Reading: Does Canceling Credit Cards Affect Your Credit Score?