If you spend Rs 1 lakh a year on your credit card and roll over Rs 25,000 only once in 12 months, a card with a high rollover charge but a generous reward programme and an annual fee waiver is a better deal than one that charges a low rollover interest but offers fewer reward points and levies an annual fee.
Credit Card A | |
|---|---|
| Rollover cost: | Rs 750 |
| Reward points (2 points per Rs 100 spent): | 2,000 |
| Value of reward points (60 paise per point): | Rs 1,200 |
| Annual fee: | Nil |
| Benefit (Points’ value–rollover cost): | Rs 450 |
The rules for encashing reward points differ across card companies. Some issuers provide a list of items that can be purchased by redeeming reward points. Others allow customers to redeem points at select retail outlets, airlines and fuel pumps. Choose a card that gives you more redemption options than a simple list of items on its catalogue.
Exception: If you rarely roll over the balance on your card, the rate doesn't matter. The add-on benefits offered by the card assume greater importance.
Rule: A customer should always go for a credit card that has the lowest rollover interest charge.
Credit Card B | |
|---|---|
| Rollover cost: | Rs 375 |
| Reward points (2 points per Rs 100 spent): | 1,000 |
| Value of reward points (60 paise per point): | Rs 600 |
| Annual fee: | Rs 300 |
| Cost (Rollover cost+Annual fee–Points’ value): | Rs 75 |
1-2 is the number of reward points that you get for every Rs 100 spent on a silver or gold credit card. Platinum cards offer 4-5 points per Rs 100 spent.
60 paise is the average value of a reward point on a silver or gold card. The reward point of a premium card carries a higher value of about Rs 1.25.
