Money Basics · Credit cards & CIBIL

Rewards & cashback

Credit card rewards, cashback, airline miles, reward points, are real. But they only pay if you use the card correctly. If you pay interest even once, the rewards are cancelled out instantly.

Types of rewards

• Cashback: direct money back to your bill or bank account. Most straightforward.
• Reward points: accumulated and redeemed for vouchers, travel, products. Value varies.
• Air miles: redeemed for flight tickets or upgrades. High value for frequent flyers.
• Fuel surcharge waiver: 1% surcharge at fuel stations waived. Small but cumulative.

When rewards actually make sense

Only if you pay your balance in full every month. A 1% cashback on ₹50,000 spend = ₹500. One month of revolving at 42% annual interest on ₹50,000 = ₹1,750, before the 18% GST charged on that interest. One mistake wipes out 3.5 months of rewards, more once GST is counted.

> Rewards are designed so that most cardholders who chase them end up carrying a balance. The bank profits massively. Use rewards. Don't be used by them.

The shapes entry-level reward cards come in

• Co-branded with one retailer: a high rate (around 5%) on that retailer alone, often tied to their paid membership. Worth it only if you already spend heavily there.
• Category cashback: a high rate on a rotating or fixed set of categories, food delivery, cabs, streaming, usually with a monthly cap and an annual fee to earn back.
• Flat-rate: a lower rate (1–2%) on everything, no categories to track. Boring, and the only one that survives contact with real spending habits.
• Travel points: points rather than cashback, valued at whatever the transfer partner decides that quarter.

Compare the fee-waiver spend threshold and the monthly reward cap before the headline rate. Those two decide what you actually earn.

3.5 monthsHow much cashback one month of interest cancels out, before the GST on that interest takes it past four

The first rule of reward cards

Never change your spending behaviour for rewards. Spend only what you planned. Rewards are a bonus on spending you'd do anyway, not a reason to spend more.

Set auto-pay for full balance. Earn rewards. Never carry a balance. That's the winning strategy.

Takeaway. Reward cards pay only if you never carry a balance. One month of interest wipes out months of rewards. Use the right card for your spending category, then pay in full.