January 22, 2019

Cashback Credit Card

In the era of accelerating digitization more and more use of electronic transactions and micro chip embedded smart plastic cards has increased. Now-a-days paper money has been replaced by plastic money. Since November 2016, after the 500 and 1000 notes ban, Government itself has been promoting payments in a well recognized channelized system via banking channels. The most widely used plastic money are Debit Card, Credit Card.

We all are human beings and it is in our nature to avail full marginal utility of our money we pay for our wants and desires. When paper money was used our marginal utility was attained by discounts, free gifts or vouchers but today when we pay via smart cards we check how much cash back we can from each payments we make. This system of cash backs and card payments have become so trending in market that it is “new mantra for existing and new businesses” and we also before any sort of payment we check whether the above features are available or not.

Banks today comes up with several offers for their users to earn points and rewards on their credit card purchases. These points or the cash back or rewards can be redeemed or utilized sooner or later as per our choice. This is mostly a particular percentage of the total purchase that gets credited as cash back. However, various banks offer different rewards and schemes for their users. It’s a blessing in disguise first of all in a credit fuelled economy we can pay later as per our credit worthiness without need of any instant bank balance secondly, to our amaze we are earning cash backs on our expenses.

What is a Cashback Credit Card?

It is a cash back reward program is an incentive program operated by credit card companies where a fixed percentage of the amount spent is paid back to the card holder. The last benefit, a monetary amount, is usually known as cash back or cash back reward.

Why to Apply Cashback Credit Card?

Application of cash back credit card is based on your spending limit yet the following points should be kept in mind:

Understand how cash back credit card functions :

It allows consumers to earn cash backs on qualifying purchases which are based on expenses we make and the places where we make frequent payments so that we can earn maximum cash back. Comparing the various cash back credit card available in market and comparisons should me made by comparing the various rates

Flat rate:

Cash back rates available for an instance say any purchase you make will give you flat 10% cash back.

Variable rate:

Sometimes the credit card offer variable rates based on type of purchase say for e.g. purchase at grocery earns you 4 to 5 % cash back and purchase at an electronic store earns you 1% cash back. Such card is useful if our spending habits align with such rates.

Rotating rate:

Such card offers high cash back based on purchase categories that change each month. Assume purchase at grocery store earns you 2% cash back in the month of june and same purchase will earn you 8% in the next month. Such cards are beneficial if you can keep a track on your current months high rate income and adjust your currents month’s expenses accordingly.

Browse for cash back credit card:

There are lot of companies that provide cash back credit cards so as per our own requirement so you need to search the best card for yourself and match the card available as per your spending limit.

Initial signing up:

Some cards have the criteria of initial deposit of certain amount before you can use the credit card.

Making purchases:

Every person has their own choices of stores and purchases so you need to check whether that product or store is available for your cash back credit card and moreover there certain limit for minimum spending and maximum cash back so that has to evaluated too

Other parameters may include checking the terms for receiving cash back, its validity and further utilization of such cash backs.

How to Apply for a Cashback Credit Card?

Next comes how to apply for a cash back credit card. After proper evaluation of joining fees & annual fees and other requirements for perfect credit card you can apply for the same either online or visiting the specific bank say you want to own a SBI Cash Back Credit Card you can apply it online choose among the 18 cards they are providing then you will get a application or a reference number that can be used to track your card and within the stipulated time you will get your card delivered at your doorsteps. Every company has its own way for application of credit card and other all relevant details are available online on their website.

Top five cash back credit card in India 2019 are:

  1. Citibank cashback credit card
  2. American Express Membership Rewards Credit Card
  3. HDFC Money Back Credit Card
  4. ICICI Instant Platinum Card
  5. Standard Chartered Platinum Credit Card

Cash back is truly the king of rewards. It is stated that among consumers who use credit card more frequently in heaviest rotation can be rewarded up to 70% cash back. When we make a purchase or a transaction with a cash-back credit card, we earn a cash back for a specific percentage of the purchase. Such features is available by paying a meager amount of annual fees that differs from bank to bank and transaction to transaction and type of credit card we use.

Such system of cash back was introduced thirty years back in 1990s with major card issuers in US with a percentage upto 5%. In India, we have more than sixty credit card providers from private banks, financial services companies or Government e.g. HDFC, HSBC, American Express, SBI, ICICI, Axis, Induslnd, Citi bank, Kotak, Emirates etc.

How Cashback Credit Card Works?

The big question in is to understand how the cash back on credit card works. On individual transaction done via credit cards, the credit card companies receive a fee from the merchant companies. When the merchant receive payments from credit cards, they pay a part of the transaction amounts as a fee to the credit card companies. The credit card companies return a percentage of such fees to their users in the form of cash back and rewards. Both discount and cash back reduce the price of the product bought. However, there’s a thin line of difference between the two. While the discount is given straightaway on a purchase you make via a credit card, cash back may not be credited instantly to the account. It would most probably be credited a few days later to the date of purchase. Now, cash back would be credited to the card account to increase your available credit limit. Normally, a bank sets a cap on the maximum amount of cash-back that it offers to its customers. It is necessary to check the requisites because even if you have spent more doesn’t necessarily mean that you are going to get a cash-back amount as per that transaction. For example, if the bank’s declares that there would be a 10 per cent cash-back offer on all purchases; they would normally cap the maximum cash-back amount at Rs 1,000. So even if you spent Rs 50,000 and expected a cash-back of Rs 5,000, you are still going to get only Rs 1,000.

There are certain things to be kept in mind to avail cash back while using Credit Card:

Where are you spending?

The credit card cannot be used at establishments we wish for. There are specific places where we can use our credit card to avail cash backs; else we won’t get any rewards. So it is necessary to make payments at specific places as per the list given by the bank or the credit card company. There will be a list of shops, stores and restaurants.

Minimum cash spent

Normally, cash back is offered only on minimum purchase amount. This amount can range as from 1500 to any amount as per the relevant authority specifies or offers available.

Amount of cash back

As discussed above the amount cash back has a upper cap fixed.

Other hidden requirements can be

  • Whether the card falls under the offer category
  • The period where the offer is valid
  • The product categories, which are eligible for offer and so on

Cash back on credit card appears to be a win-win situation for both consumers and sellers. For sellers, it drives a customer life time value because if a particular seller is in the specific list of credit card companies the consumer will prefer to go back to the same seller and on the part of consumers, if given a cash back that tends to reduce the price of product thus the consumer has to pay less.

Apart from benefits from customer and sellers, such a system helps the economy as a whole to understand the spending or rather the consuming pattern of the people and thus gives a better consumer credit report. Thus like any other financial product the system of cash backs and use of credit card comes with its own pros and cons but the wise use of same can help a individual to boost credit score and proper study of same can help the Banks, Credit Card Companies and Government to alter interest rates and fees