Most credit card transactions will earn you some reward points. The reward rate will differ from bank to bank and card to card. These reward points are very versatile and can be used in various ways. Depending on how you use them, you can derive a value between Rs. 0.20 to Rs. 1.00 per reward point. In some cases, you can even derive a value beyond this range.
In this article, we will focus on eight different purposes for which you can use credit card reward points. We will also understand how you can derive the maximum value for each reward point depending on the purpose for which you use them.
Some credit cards allow you to redeem the reward points for a statement credit. Accordingly, the amount equivalent to the worth of reward points is credited to your credit card account. When reward points are redeemed for cash, usually, the value derived is between Rs. 0.20 to Rs. 0.25 per reward point. Some premium cards may offer a value beyond this range.
For example, assume you have 1,000 reward points and the value per point is Rs. 0.25. In this case, when you redeem them for statement credit, you will get a value of Rs. 250. The amount will be credited to your credit card account and will reflect in your statement.
In your next monthly statement, the outstanding amount will be calculated by deducting Rs. 250 from the payable amount. This method will give you a low redemption rate and is not the best-recommended way to use your credit card reward points.
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Pay with points
Some cards allow you to use your credit card reward points to pay for your online transactions. The value derived is usually between Rs. 0.20 to Rs. 0.25 per reward point. For example, assume that you have to pay Rs. 500 for an online purchase and you choose to pay using your reward points. If the value per reward point is Rs. 0.25, your 2,000 reward points will be debited for this transaction.
On the payment page, one of the payment options that you will see is “Pay with Points” or similar wording. When you select this option, you will be able to pay for the transaction with credit card reward points.
Redeem against catalogue merchandise
The next option for redeeming reward points is to use them for purchasing merchandise from the catalogue available on the bank website. In the catalogue, you may or may not find the brands/products that you need. Also, in most instances, the product is priced at the MRP, whereas you may be able to get the product at a discount either with online or offline merchants. So, this is also not the best way of utilising your credit card reward points.
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Redeem against gift cards
You can redeem reward points against gift cards of various brands, such as Amazon, Flipkart, and 100s of other brands. Most credit cards give a redemption rate of Rs. 0.25 per reward point. However, some premium credit cards give a redemption rate in the range of Rs. 0.50 to Rs. 1 per reward point in this category.
Some banks also bring short-term offers from time to time where the redemption rate offered is increased (for example, Rs. 0.70 per reward point instead of the usual Rs. 0.50).
Redeem against flight tickets and hotel accommodation
Some banks allow credit cardholders to redeem reward points for booking tickets and other products through their portals. For example, HDFC Bank offers the SmartBuy portal where cardholders can redeem reward points for booking flight tickets, hotel accommodation, and a few other products.
The value of a reward point ranges from Rs. 0.25 to Rs. 1, depending on the type of credit card you hold. For some premium credit cards, the redemption value is Rs. 1 per reward point.
Transfer to air miles
Some credit cards allow you to transfer your reward points to frequent flyer programs (FFP) and convert them into air miles. The points to air miles conversion is based on a specified ratio. The airmiles can then be used to book flight tickets, known as award tickets.
For example, for booking domestic flights, you can transfer your credit card points to Club Vistara (CV), the FFP of Vistara. Similarly, for booking international flights, you can transfer the credit card points to KrisFlyer, the FFP of Singapore Airlines.
The number of air miles required for booking an award flight ticket in a particular sector is usually fixed. The price of a revenue ticket (booked by making payment) is dynamic. The revenue ticket pricing is based on how early you are booking it, the flight occupancy, peak season, fuel prices, etc.
Usually, the value is between Rs. 0.50 to Rs. 2.00. In some cases, the value per point may go beyond this range.
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Transfer to hotel loyalty programs
If you want to enjoy a free vacation, you can transfer your credit card reward points to a hotel loyalty program along with a frequent flyer program. Hotel loyalty programs such as Marriott Bonvoy, Club ITC, etc. allow you to transfer credit card reward points.
The credit card points to hotel loyalty points conversion is based on a specified ratio. You can then use the hotel loyalty points to book stays at your favourite hotels.
For example, Marriott Bonvoy points can be used to book stays at 7000+ hotels worldwide. The points required to book 1 night stay are dynamic. Usually, the value is between Rs. 0.50 to Rs. 2.00. In some cases, the value per point may go beyond this range.
So far, we have discussed 7 different ways of using credit card reward points. If you don’t wish to use your points for any of the above purposes, you can just donate them and earn some good karma. Some banks allow you to donate your points to an NGO/charity of your choice. The value per point is usually Rs. 0.25. For some premium cards, the value per point may be in the Rs. 0.50 to Rs. 1 range.
Credit card reward points can be used for multiple purposes
Credit card reward points are versatile. They can be used for various purposes based on your needs and preference. If you prefer cash, you can opt for statement credit or use reward points for paying for your online transactions. You have the option of redeeming them for merchandise or gift cards. For all these options, the value is usually Rs. 0.25 per point.
If you want to derive a higher value, you may consider using them for booking flight tickets or hotel accommodation, where you can get the value per point between Rs. 0.50 to Rs. 2.00 or higher. Some people book flight tickets and hotel accommodation with reward points and enjoy a vacation, almost free. That is the power of credit card reward points!
Gopal Gidwani is a freelance personal finance content writer with 15+ years of experience. He can be reached at LinkedIn