Wrong credit card could be costing you up to ₹2 lakh a year, says study

Think all credit cards offer broadly similar rewards? A new study suggests that assumption could be costing consumers tens of thousands — or even lakhs — of rupees every year.

A study by 1 Finance Magazine found that 92% of credit card users are not using cards that match their actual spending patterns, resulting in significant missed savings. While the average cardholder currently saves only about 4% of annual expenses through rewards and benefits, the potential savings could rise to 10%, and even 13-14% for higher spenders with the right card mix.

The bigger your spending, the bigger the loss

The study analysed transaction data from 129 individuals across income groups and found that the cost of using the wrong credit card increases sharply with spending.

For households spending less than ₹5 lakh annually, potential savings are estimated at ₹20,000-25,000 a year. However, the average cardholder currently captures only about 4.7% in rewards, resulting in an estimated loss of ₹4,000-5,000 annually.

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The gap widens considerably as spending rises.

Consumers with annual expenses of ₹5-8 lakh could potentially save ₹65,000-70,000, but are currently saving only around 4.1%, leaving ₹38,000-42,000 on the table every year.

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Among those spending ₹8-15 lakh annually, the unrealised savings climb to ₹85,000-90,000 a year. For consumers whose annual spending exceeds ₹15 lakh, the missed opportunity becomes even larger, crossing ₹2 lakh annually. According to the study, this group could potentially earn ₹2.8-3 lakh in annual rewards but currently captures only a fraction of that value.

Why are people missing out?

The report says the problem isn't that people spend too little—it is that their spending and credit card rewards don't match.

Many consumers continue using a single card for every purchase or accumulate multiple cards without understanding which one offers the highest rewards for groceries, travel, dining, fuel or online shopping. As a result, they earn basic reward points instead of accelerated rewards, milestone bonuses or cashback available on category-specific cards.

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The study also notes that many users redeem points through low-value reward catalogues instead of travel bookings or brand vouchers, where reward points can deliver two to five times more value.

How can cardholders improve savings?

Rather than collecting several cards, the report recommends maintaining one primary credit card that covers 60-70% of regular spending and one complementary card for categories where the primary card offers weaker rewards.

It also advises reviewing the last 6-12 months of spending to identify recurring expense categories before choosing or replacing a card. Once spending patterns are understood, consumers can route purchases strategically to qualify for milestone benefits and bonus rewards without increasing their overall expenditure.

A case study cited in the report showed that following this approach nearly doubled a customer's effective savings rate—from 3-4% to 8.5-9%—generating ₹85,000-95,000 in annual benefits while keeping spending unchanged.

With India's credit card spending value tripling from ₹6.3 lakh crore in FY2020-21 to ₹21.1 lakh crore in FY2024-25, the study suggests that optimising card usage could become an increasingly important part of personal financial planning.

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