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Reward points vs cashback
- Thread starter Santhosh
- Start date
S U D O
TF Premier
You can't compare.
Still for your understanding, in layman terms:
5% cashback is 5rs cashback for every 100rs spent
5% reward points is 5 Reward Points for every 100Rs spent. And RP have different value for different banks, based on cards and the mode of redemption you choose for redeeming those points.
Like the post if you found it helpful.
Last edited:
Santhosh
TF Select
100 RS spend 5 reward points , 1 RP=1RS
100 RS spend 5% cashback
In both case sane amount but Reward points is better, Once you got some reward points like 3k or 5k you can use that in bulk.
But in cashback we do not have that control and we do not know how much cashback are coming in few months and how we used that.
100 RS spend 5% cashback
In both case sane amount but Reward points is better, Once you got some reward points like 3k or 5k you can use that in bulk.
But in cashback we do not have that control and we do not know how much cashback are coming in few months and how we used that.
If for an ordinary card user cb best
If one is in hotel stays and airmiles then rewards
Santhosh
TF Select
SBI Cashback Card
HDFC Millenia Card
HumorSimpson
TF Prestige
First benchmark the value in INR for your scenario. Consider earn and burn thresholds. Hoarding points is always a mental trauma , you will never know when they get devalued.
Simple Cards Example
SBI CB vs. Tata Nue on groceries: let's say you are buying groceries on nue app, sbi cb gives you 5% cash and nue gives 5% rp. Here earning and burning is simple though. See the point value, if you spend 1000rs, sbi cb gives you 50 rs to your statement without any hassle. Tata Nue gives you 50rps. Next in another order if you are paying by nue for 1000rs, you will be paying 950 and will be getting 47.5 rps only. But the same would be 50rs in sbi cb. SO your point value is effectively 4.75% as compared to 5% sbi.
Premium Cards are little more complex . Do your math to understand.
S U D O
TF Premier
Both are cashback cards -_-
If compare these 2 cards then SBI cashback always better as we get direct cashback credit whereas for Millennia you need to take minor effort of converting reward points into cashback by paying redemption fee.
cardio_guy
TF Legend
As a beginner, I was initially interested only in cashback credit cards. The Amazon Pay ICICI card was particularly attractive to me because of its 5% cashback offer, so I applied for it in 2022. Before this, I was not familiar with credit cards or how to use them effectively. After getting the Amazon Pay card, I started collecting other cashback cards, such as the Swiggy HDFC card, which offers 10% cashback and has become my most-used card. Over the last two years, all the cards I have acquired focus on cashback, including the Amazon Pay, Tata Neu Infinity, and Swiggy HDFC LTF cards.
Recently, I've been considering switching to reward points-based credit cards. Here are some points I've thought about:
• Cashback Cards: You don't need to be loyal to any specific card or bank. You simply use the card that offers the best cashback rate at the time, with returns being straightforward, like 1%, 4%, or 5% etc.
• Reward Points Cards: These require loyalty to a particular bank, as accumulating points is beneficial only if you consistently use the same card. There are advantages like multiplier sites, where you can earn 5x points for certain purchases, and milestone benefits that provide bonus points for reaching specific spending thresholds.
Switching to reward points cards may change spending patterns, requiring loyalty to certain cards, banks, sites, products, or brands to maximize returns. Unlike cashback cards, the return rate for points-based cards isn't upfront and depends on how effectively the card is used. For instance, using features like SmartBuy can maximize returns, but not everyone is aware or able to use these features optimally. Missing milestone bonuses can also decrease overall returns, adding uncertainty.
Another consideration is how to use the accumulated points. People often redeem them for hotel stays or air miles, as other options like gift vouchers or small appliances may not be as appealing. Using points can come with complications, such as ensuring the cardholder's name matches the reservation name for hotels or flights. Questions arise about booking for others and the impact of potential name mismatches.
Given these factors, I seek advice from experienced users on transitioning from cashback to reward points-based cards. Which cards are good for getting started? Is a combination of both card types beneficial? How do experts manage this transition? Additionally, there are concerns about points expiring, transferring points, changes in redemption value, and what happens if banks devalue points or if partners leave the points program. These are important considerations when making this switch.
Recently, I've been considering switching to reward points-based credit cards. Here are some points I've thought about:
• Cashback Cards: You don't need to be loyal to any specific card or bank. You simply use the card that offers the best cashback rate at the time, with returns being straightforward, like 1%, 4%, or 5% etc.
• Reward Points Cards: These require loyalty to a particular bank, as accumulating points is beneficial only if you consistently use the same card. There are advantages like multiplier sites, where you can earn 5x points for certain purchases, and milestone benefits that provide bonus points for reaching specific spending thresholds.
Switching to reward points cards may change spending patterns, requiring loyalty to certain cards, banks, sites, products, or brands to maximize returns. Unlike cashback cards, the return rate for points-based cards isn't upfront and depends on how effectively the card is used. For instance, using features like SmartBuy can maximize returns, but not everyone is aware or able to use these features optimally. Missing milestone bonuses can also decrease overall returns, adding uncertainty.
Another consideration is how to use the accumulated points. People often redeem them for hotel stays or air miles, as other options like gift vouchers or small appliances may not be as appealing. Using points can come with complications, such as ensuring the cardholder's name matches the reservation name for hotels or flights. Questions arise about booking for others and the impact of potential name mismatches.
Given these factors, I seek advice from experienced users on transitioning from cashback to reward points-based cards. Which cards are good for getting started? Is a combination of both card types beneficial? How do experts manage this transition? Additionally, there are concerns about points expiring, transferring points, changes in redemption value, and what happens if banks devalue points or if partners leave the points program. These are important considerations when making this switch.
Here is my take on this-
Cashback is >> Reward Points whenever you have an opportunity to gain Cashback & Reward Points you need to always compare the multiple kf difference between them and for me until the reward points benefits is not more than 1.5x of Cashback I will prefer cashback.
Why do I say this?
Because when you consider cashback it is basically paying your bills and making your net expense less while Reward Points are actually promoting you to spend as while you redeem them and most probably on travel that will always be an additional expense you will incur.
So are Reward Points Credit Cards bad?
Absolutely not as I said 1.5x of Cashback can be easily achieved with any Reward Points CC but then in RP also you would need to value things differently like if you are earning in Hotel/Flight FFP Miles then they are obviously less valuable as compared to HDFC RPs which let's you redeem the points on any hotel/flight of your choice irrespective of the brand/location & also have flexibility to redeem it even if you are planning any travel even for the same day.
While in miles you would need to look at award seats etc. and the hotel brands availability as well as feasibility.
So for a person with normal spends like mostly Groceries, some shopping, non business utility spends, few essential insurance a set of HDFC Premium CC for Smartbuy etc & good CB cards like HSBC Live+, SBI CB/HDFC Swiggy, HDFC Tata Neu etc would make a lot of sense.
While Amex Platinum Travel might lure you of easily earning 40k+ MR Points on 4lk spends but you need to think do you really want to stay in 5 Stars every year and plan your travel according to hotel's availability in that location or travel according to your choice and live in any hotel which is convenient but less luxury and nearest to your place of visit. Such cards are great for people who can spend 4lk even in one go and have lot of room for spends on other CCs as well.
Cashback is >> Reward Points whenever you have an opportunity to gain Cashback & Reward Points you need to always compare the multiple kf difference between them and for me until the reward points benefits is not more than 1.5x of Cashback I will prefer cashback.
Why do I say this?
Because when you consider cashback it is basically paying your bills and making your net expense less while Reward Points are actually promoting you to spend as while you redeem them and most probably on travel that will always be an additional expense you will incur.
So are Reward Points Credit Cards bad?
Absolutely not as I said 1.5x of Cashback can be easily achieved with any Reward Points CC but then in RP also you would need to value things differently like if you are earning in Hotel/Flight FFP Miles then they are obviously less valuable as compared to HDFC RPs which let's you redeem the points on any hotel/flight of your choice irrespective of the brand/location & also have flexibility to redeem it even if you are planning any travel even for the same day.
While in miles you would need to look at award seats etc. and the hotel brands availability as well as feasibility.
So for a person with normal spends like mostly Groceries, some shopping, non business utility spends, few essential insurance a set of HDFC Premium CC for Smartbuy etc & good CB cards like HSBC Live+, SBI CB/HDFC Swiggy, HDFC Tata Neu etc would make a lot of sense.
While Amex Platinum Travel might lure you of easily earning 40k+ MR Points on 4lk spends but you need to think do you really want to stay in 5 Stars every year and plan your travel according to hotel's availability in that location or travel according to your choice and live in any hotel which is convenient but less luxury and nearest to your place of visit. Such cards are great for people who can spend 4lk even in one go and have lot of room for spends on other CCs as well.
cardio_guy
TF Legend
Any suggestions here?
DCB/Infinia are no brainer.
Pradumya
TF Ace
With cashback cards you only need to worry about MCC and respective % calculation.
Whereas with reward points you need to calculate the equivalent value of reward points after redemption fees in % terms.
Example - spent 10k on something eligible.
1. You got 5% cashback
2. You got 10% reward points (but 1RP = 0.5₹)
If you didn't think about the reward point conversion rate then you will feel 2nd option is better. But both the options give equal value of ₹500. So both the options are giving 5% value.
(Assuming that there is no RP redemption fees)
Whereas with reward points you need to calculate the equivalent value of reward points after redemption fees in % terms.
Example - spent 10k on something eligible.
1. You got 5% cashback
2. You got 10% reward points (but 1RP = 0.5₹)
If you didn't think about the reward point conversion rate then you will feel 2nd option is better. But both the options give equal value of ₹500. So both the options are giving 5% value.
(Assuming that there is no RP redemption fees)
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