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Cashback Credit Cards: Features, types & which one to choose?

3 Mins read

You have often heard of websites and stores giving huge offers, cashback and discounts on certain credit cards. I for one have often pondered about why the default credit card which came with my bank account has so few offers and benefits. It is always good to have clarity on the rewards and benefits before opting for one such card. 

So, what is a credit card and why do you need them? A credit card is a rectangular piece of plastic or metal, that can be used as a payment card for all your shopping needs. It is linked to your credit limit, and whatever you spend on it, is deducted from this limit which is payable at the end of the credit card’s billing cycle. Not everyone is eligible for a credit card, so make sure you have a stable income or business and a satisfactory credit score to apply for one.

Not all the time would you have the required funds in your bank account to pay for a dress or gadget you badly want. Or maybe you’d like to book flight tickets but pay at a later date when your salary comes. In such scenarios, a short term credit feature comes handy and is a reason why credit cards are so popular. India has over 51 million credit cards in circulation right now. 

Two major types of credit cards are available in the Indian market today:

  1. Cashback Credit Cards– they offer cashback of certain percentages on the expenses made on it
  2. Reward Points Credit Cards-it offers reward points for purchases made through the card

This guide here is a walkthrough of cashback credit cards with detailed elucidation on their features, types and further details to help you choose the best one for your needs and requirements.

Cashback credit cards pay you back a certain percentage of your spendings. This varies from 0.5% to 3% or more, depending on where you shop or purchase. The cashback is directly credited to your credit card account, or in some cases your bank account as well. 

Such types of cards usually have a low annual fee or monthly fee. Cashbacks are adjusted against the credit limit so that you are automatically charged less for your spendings. For e.g., if you have an outstanding bill amount of Rs. 10,000, and you receive a cashback of Rs. 500, then your outstanding amount comes down to Rs. 9,500. The rewards you receive in the form of cash backs often have a capping of some amount per month per brand or website. 

Cashback credit cards help you save more. Image source: www.pixabay.com

There are many cash back credit cards out there which can be listed into three main categories:

Flat or Same Rate of Cashback

A standard rate of cashback is given on all kinds of purchases above a certain value. For e.g. a 1% cashback on a minimum of Rs. 500 per transaction, capped up to Rs. 100 per transaction.

Structured Cashback Rate 

This offers varied cashback rates with different kinds of purchases. Like maybe 3% on buying groceries, 1% on paying at fuel pumps, 2% at online e-commerce shopping, etc. 

Dynamic Cashback Rate

Here cashback rates are varying across different months and brands. You may get to select a list of 5 offers every month, which would benefit you. 

Reward points-based credit cards work in a similar manner except you are rewarded with points rather than direct cashback. These reward points can then be redeemed for gifts, travel tickets, etc., or cash. The annual charges for card renewal are generally on the higher side. 

Standard Chartered offers a unique credit card, the Ultimate Credit Card, that combines the benefits of both cashback and rewards, along with added services. This card is targeted towards the premium category of customers who want maximum benefits with just one card. 

The Ultimate Credit Card for all your shopping needs. Image Souce: www.sc.com

Design-wise this card looks absolutely gorgeous! It has an all-black design with golden letters and has the Mastercard payment gateway. Like all new credit cards, this one too has the contactless feature which enables you to pay for up to Rs. 2000 on POS machines without requiring a PIN. It is a super-premium card, and hence the features offered are suited to the lifestyle of a High Networth Individual. 

Travel Concierge services, airport lounge access, Priority pass for an international lounge, Golf club memberships, air-accidental death coverage, travel and hotel booking benefits, the luxury resort offers – the list goes on and on. Cashbacks are offered on MakeMyTrip bookings as an introductory benefit as well. 

There is a high eligibility criterion for this credit card. Monthly income should be Rs. 2 Lakhs or more, and for business owners, should be Rs. 4 lakhs or more. Annual charges are around Rs. 5000, and with every annual renewal, you receive 5000 points as well.

Like other credit cards, this one offers all the basic features like conversion to EMI and balance transfer from another credit card as well. 

If you are in the market looking for a cashback credit card that offers premium services and reward points too, there are a few to select from. Standard Chartered’s Ultimate Credit card has been a huge hit, and if you are eligible for one, there is no reason to not grab one!