Difference Between Cashback vs Reward Points In Credit Cards



Credit cards are a great financial tool to add to your wallet but it is strenuous to choose one type among so many available types of credit cards. The two most popular ones are the cashback and reward points-based credit cards.

The key to choosing the right type of credit card is identifying your needs and spending habits first and then selecting the ones which complement your requirements. With that being said, hereunder we have discussed the cashback and rewards credit cards so that the concept behind those credit cards can get cleared to you and how are these two different from each other. Without any further ado, kick start your research. 

 

What is a cashback credit card?

Cashback credit cards are those credit cards whose incentives are based on a percentage of your spending. You get a certain percentage back in your account in the form of cashback. Currently, the most popular cashback credit card is the ICICI Amazon Pay card as it is a lifetime free credit card and offers cashback benefits to both prime and non-prime members. Hereunder are the pros and cons of having a cashback credit card that you must know.

Pros of having a cashback credit card

  • The biggest advantage of this type of credit card is that cashback never expires.
  • You never have to worry about the redemption of your cashback, as they are directly credited to your account.
  • Cashback credit cards are affordable and are ideal for first-time credit card users.
  • Good to understand how a credit card works and to build a credit score from the scratch.

Cons of having a cashback credit card

  • The rewards are limited on this type of credit card. You may not earn cashback on every spend category and be able to enjoy other benefits like travel benefits, movie & dining benefits, etc.
  • The rewards i.e. cashback are not flexible as you cannot convert them to miles, or redeem them against products and services.
  • If not used wisely can also lead you to a debt trap.

 

What is a rewards credit card?

Rewards credit cards are those credit cards that let you earn incentives in the form of reward points. On using a reward credit card for making purchases the rewards program on your credit card lets you earn reward points that you can further redeem. The rewards program differs from credit card to credit card. One of the popular rewards credit cards is SBI SimplyCLICK Credit Card and you can avail of this credit card at Rs. 499. This credit card allows you to earn 1 reward point on every Rs. 100 spent on offline spending and accelerated reward points (10x RPs) on online spending. Here are some pros and cons of having a rewards credit card.

 

Pros of having a reward credit card

  • You can earn reward points on each category or on selected categories.
  • The rewards are flexible and can be redeemed for various products and services, and are convertible too.
  • These credit cards come in various affordable ranges entry-level to super-premium credit cards.
  • They also help in building a credit score.
  • You can earn accelerated reward points on these type of credit cards.

Cons of having a reward credit card

  • The reward points come with an expiry date so you have to redeem them before they expire.
  • If they are not used properly they can also lead you to a debt trap. 

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