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How Do Credit Card Reward And Redemption Work?

How Do Credit Card Reward And Redemption Work?


Credit cards have great benefits – flexibility, convenience, rewards, and convenience. You can get gifts, discounts, points, and more when you use a credit card. Every credit card company gives you credit points for using the card. You receive more points for spending money.

A credit card rewards program is designed to reward customers for their cash or debit card purchases. The benefit of these programs is that they help merchants attract new customers and reward loyal ones. Credit card rewards programs are great ways to earn credit card reward points and redeem them for perks and gifts.  Unfortunately, they seem to confuse some people. What exactly are credit card rewards, and how does it work?

What is a credit card reward point?

A credit card reward is for every Rupee spent on your credit card. Each bank provides different ways to  accumulate points. The number of points will change depending on whether a card is a basic credit card or one with high priority. Usually, card providers put a minimum limit on the number of reward points a user can redeem. Furthermore, these reward points can be redeemed online or offline, depending on the terms and conditions. Many card providers also allow the conversion of reward points into cash.

How can I get credit card rewards points?

Rewards points can be accumulated in a variety of ways by credit card holders. Some of the common ways to earn reward points are as follows.

  • Purchase through credit cards and regularly.
  • Spending on special categories like large-value purchases to get accelerated reward points.
  • Earn reward points for specific sign-up as a joining bonus point.
  • Bonus is available on attaining a certain spending threshold or milestone in a predefined period.
  • Reward points are also earned on paying the renewal fees for the credit cards.
  • For using the card when travelling overseas, certain credit cards provide bonus points.
  • For your family members, you can obtain additional cards. Now any points collected on those cards will be credited to you.

Who pays for reward points? 

You’re mistaken if you think that credit card companies are paying for the reward. Let us understand this.

  1. Redemption Fee:

The rewards that card providers offer are not completely free of cost. They charge a fee at the point of redemption; thus, you lose maximum rewards in this process.

  1. Interchange Fee:

The card provider charges the store an interchange fee equal to a specific percentage of the sale.

Thus, the store owners pay this fee and, in turn, increase the retail prices for customers.

  1. Limited value:

Most reward points are valid only for a limited period and purpose. There is also a cap on the amount that can be redeemed. Thus, the customers end up paying a significant sum for the purchase to redeem that offer.

How does reward point redemption work?

Before starting the process for point redemption, it is advisable to check the three basic criteria or conditions that back the reward point.

  1. Based on the credit card features, the minimum point requirement is stated, which needs to be considered well in advance.
  2. Understanding the structure of redemption fees is essential, as this varies for each offer and card.
  3. Being careful about the reward point’s expiration date is the next important thing.

You can redeem your points offline by visiting a bank branch online, calling customer care or visiting a bank’s partnered retail store.

You can redeem reward points for merchandise, travel, room miles, cash back, and gift cards.

Here are some pointers to help cardholders be more vigilant:

  • Cardholders can confirm that the rewards programme fits their financial demands and way of life. They must not choose cards that offer air travel advantages or Air Miles if they do not frequently fly.
  • If a cardholder has a rewards account about which they are confused, they can find out what options they have by speaking with the customer service representative. They will be able to comprehend better the kind of credit card they own.
  • Lastly, cardholders must read the credit card terms and conditions, no matter how tedious they must be.

Final Words

Credit card rewards are the perks offered to customers, which are converted into lifetime free credit cards on attaining specific milestones and other benefits. Today almost all banks have launched their credit cards with distinct features and rewards programs. So be careful to pick the ones that are appropriate for your requirements.

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