How to earn maximum rewards out of your debit cards

With the changing times, we are fast moving towards a cashless world where we would be least dependent on wallets loaded with currency notes.

The use of credit cards, debit cards, online banking and mobile wallets is gaining popularity these days. And why not, these facilities have made our lives easier and it also come with loads of offers, freebies and rewards.

There are many who do not understand these offers fully and stand to lose. One such benefit is redemption of reward points earned on the purchases made through debit/credit cards.

What are reward points and how they work for you?

Whenever you use your debit card for making purchases or transactions, the card issuing company or bank earns an interchange fee from the outlet concerned. This fee varies between 1 per cent and 2.5 per cent. The issuer of your debit card also earns from the annual charges it levies on card holders.

The company then shares with the card holder the money it makes from interchange fee in the form of reward points. There are certain factors that decide how much reward points one can earn on card transactions. These are as follows:

Card type determines reward points: A car holder earns one or two reward points on every transaction of Rs 100-150. If you hold premium card, you may earn three to five points. Generally, a card holder earns one point on every purchase of Rs 40-100. Basic cards are cheaper while premium ones have high annual fee.

Co-branded cards mean greater rewards: Many companies offer co-branded cards in association with big retail outlets, petrol companies and airlines etc. The reward points earned on these cards is much higher than any other card.

Where you spend also matters: The reward points you earn on card transaction depends on the interchange fee that the card company earns on a transaction. The more the company earns, more benefits are passed on to the customers.

Redeeming reward points

Every reward point has a value which differs from company to company. Suppose you have earned 4,000 points and the value of one reward point is 30 paise, the total value of your reward will be Rs 1,200.

You can redeem your points by choosing from a range of options which include clothes, electronic goods, consumer durables, cosmetics, home appliances, discounts, gift vouchers and mobile recharge. Reward points may even be used to buy air tickets. Some companies even waives off its annual fee against the reward points earned.

To make most out of the opportunity, you should choose the programme that has a wide range of offers. Redemption is quite convenient and one can avail it online.

While accumulating reward points, one must remember that these expire after a certain period of time. This duration may vary from one to three years.

How to make more out of it?

You do not have to go on a shopping spree or splurge unnecessarily to increase your reward points. Now banks are offering reward points on various other transactions such as:

✔ Timely payment of loan EMIs
✔ Online or mobile transactions
✔ Opening of demat accounts
✔ Some banks also offer reward points on foreign currency remittance.
✔ If you own a small or medium enterprise, you may also earn reward points by maintaining high average bank balance.
✔ Some banks, such as HSBC, even offers reward points on activity such as updation of contact details using internet banking.
✔ An SBI customer is rewarded 20 points if he does not request for a cheque book in a year
✔ You can earn points by opting for ECS transactions.