Banking: Know which credit card to get, banks will not tell you this secret..

In today's era, credit cards have become not just a necessity but a smart financial tool. Whenever someone thinks of getting a new credit card, the biggest question in their mind is which card to get. There are hundreds of types of cards available in the market, but broadly they come with two types of benefits - one is 'cashback' and the other is 'reward points'. Both are beneficial in their own way, but if you make the wrong choice, you may miss out on the benefits that you should have gotten. Therefore, it is very important to understand the difference between these two and which card will prove to be the best for you according to your spending habits.

Many people get a credit card just because the bank is giving an offer or a friend has praised it. But this decision directly affects your pocket. A cashback card gives you a direct cash discount on your expenditure, which gets reduced in your next bill. On the other hand, reward points are a kind of game in which you collect points and then use them for things of your choice, such as flight tickets, hotel bookings, or gift vouchers. Today, we will solve this puzzle and tell you in simple language which card to choose will be a wise decision for you.

What is this cashback credit card?

The concept of a cashback credit card is straightforward. Whenever you buy something or pay a bill with this card, the bank refunds you a certain part of your expenditure (usually 1% to 5%). This refund is directly credited to your credit card statement, which means that your next month's bill is reduced by that amount. You do not have to make any extra effort to get these benefits; everything happens automatically.

It is exactly like a shopkeeper giving you a direct discount on your purchase. There is no hassle of where the points will be used or what their value will be. That is why, for those who do not like too many frills and want direct savings, this is an excellent option.

Advantages and disadvantages of a cashback card

Like everything, a cashback credit card also has its advantages and disadvantages, which are important to know.

Easy to use: Compared to the reward system, it is very simple, with no complexity.

Low reward rate: Most cards offer only 1-5% cashback.

Automatic credit: Cashback automatically comes to your account, and there is no hassle of redeeming it.

Limit on cashback: Often, there is a limit on how much cashback you can earn in a month.

Direct savings of money: It directly reduces your bill, which gives you the feeling of saving real money.

No discount on some expenses: There is no cashback on some things like petrol, wallet load, and paying rent.

No fear of expiry: It gets adjusted in the next bill, so there is no worry about it ending or expiring.

Annual fee: Except for a few cards, most have an annual fee of Rs 500 to Rs 1000.

So what is special about cards with reward points?

A reward credit card is for those who want to get some big benefits from their expenses. In this, you get points on every expenditure. Banks decide how many points you will get for spending how much money. Like some banks give points for every Rs 100, while some give points for Rs 150. The biggest feature of these points is their versatility. You can use them in many different ways.

It is a kind of digital piggy bank, in which you accumulate points and then redeem them at your will to get something big. For those who travel often or do online shopping, this card is no less than a treasure.

Where can reward points be used?
The world of reward points is very big. You can redeem them at many places according to your need and choice:

Flight and hotel booking: This is considered the most beneficial way to use reward points.

Gift vouchers: You can buy gift vouchers from big brands like Amazon and Flipkart.

Online/offline shopping: On some portals, you can pay directly with points.

Convert to cash: You can convert points into statement credit, which is directly deducted from your bill. However, the value of points is often less in this.

Transfer to airline/hotel partner: You can transfer your points to airline and hotel loyalty programs like Vistara or Marriott.

Donation to charity: Some banks also give the option to donate these points.

One thing to keep in mind is that the value of points varies at different places. It may be that 1 point in statement credit is worth 25 paise, but for flight booking, the same 1 point can be worth up to Rs 1.

Now the question is, which card should you choose?

So now, coming to the biggest question, which card should you get? The answer to this lies in your own needs and spending patterns. Let's understand it in detail.

If you are fond of travelling, and you often travel by flight and stay in hotels, then a credit card with reward points is best for you. These cards earn you more points on travel expenses, and you can use those points to avail a free holiday.

If you like simple savings, and you do not travel much and you want to save on monthly groceries, bills and small shopping, then a cashback credit card is for you.[3] You do not have to do any accounting and you get a direct saving on your bill every month.

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