When it comes to choosing the best credit card, one of the most important decisions you’ll face is whether to go for a cashback credit card or one that earns reward points. Both types offer great benefits, but they serve different purposes and cater to distinct needs. So, which one should you choose? Let’s dive into a detailed comparison to help you decide which option suits your lifestyle and financial goals.
Cashback vs. Reward Points: What’s the Difference?
Before we explore the pros and cons of each, let’s clarify what cashback and reward points actually mean.
- Cashback: This is a direct monetary rebate on your purchases. For example, a credit card that offers 5% cashback means that for every ₹100 spent, you earn ₹5 back as a credit to your account. It’s simple, straightforward, and you can use it however you wish.
- Reward Points: These are points you accumulate for every purchase made with your card. These points can be redeemed for a wide range of rewards, such as products, gift cards, travel benefits, or even online shopping credits. The value of these points varies based on the card issuer and redemption options.
Now that you understand the basic concepts, let’s compare the best cashback cards in India with reward points credit cards in terms of their features, benefits, and when each is the right choice for you.
1. Simplicity of Cashback vs. Flexibility of Reward Points
One of the biggest advantages of cashback credit cards is their simplicity. The cash you earn can be used for anything—whether that’s paying off your bill or treating yourself to something special. It’s immediate and doesn’t require any effort to redeem.
In contrast, reward points are more flexible but require more planning. Depending on the card, you can redeem your points for travel perks, dining discounts, shopping, or even converting them into cashback. However, the value of reward points can vary widely based on how you choose to redeem them.
Example:
- With a cashback credit card, spending ₹5,000 on groceries might earn you ₹250 cashback.
- With a reward points card, the same ₹5,000 could earn you 5,000 points, which could be redeemed for ₹500 worth of gift cards or travel vouchers—if you use the right redemption options.
2. Rewards for Everyday Purchases vs. Exclusive Perks
Cashback credit cards are ideal for those who want to save money on everyday purchases. Whether it’s buying groceries, filling up your fuel tank, or paying your utility bills, you can earn cashback on all these expenses. It’s a no-hassle way to save money, especially if you don’t want to track point categories.
On the other hand, reward points are great for those who like to take advantage of exclusive perks, such as travel credit card benefits, dining offers, and premium experiences. Cards like the SBI cashback card and premium credit cards in India often offer attractive reward points for travel-related expenses, making them ideal for frequent travelers.
Real-Life Scenario:
- If you’re using a fuel cashback credit card, you get direct cashback on every fuel purchase, which adds up over time, making it a great option for those who commute regularly.
- If you use a reward points card for online shopping, the points you earn can be redeemed for discounts on products or converted to miles for your next trip abroad.
3. Which Option Saves You More?
When choosing between cashback and reward points, it’s essential to consider how much you spend in different categories and what benefits matter most to you.
Cashback Credit Cards: These cards are more predictable and transparent. You know exactly how much you’re getting back in cash. This works best if you’re someone who likes straightforward savings and doesn’t want to deal with the complexity of redeeming points.
Reward Points Credit Cards: These cards offer more flexibility and often come with higher earning rates for specific categories (such as travel or dining). However, the value of reward points can fluctuate, and redemption can sometimes require additional steps. For those who enjoy maximizing their benefits through strategic redemptions, these cards are a great choice.
4. Top 5 Cashback Credit Cards vs. Reward Points Credit Cards
Let’s take a look at some of the best credit cards for dining, travel, and shopping in 2024:
Top Cashback Credit Cards:
- HDFC Millennia Credit Card: Earn 5% cashback on Amazon and Flipkart, 2.5% cashback on dining, and more. It’s one of the best cashback credit cards in India for online shopping and daily expenses.
- SBI Cashback Card: Get 5% cashback on online shopping and 1% cashback on other expenses. It’s perfect for beginners and those who prefer zero annual fee credit cards.
- Axis Bank Ace Credit Card: Earn 5% cashback on fuel purchases, dining, and bill payments.
Top Reward Points Credit Cards:
- ICICI Bank Platinum Chip Credit Card: Earn 2 reward points per ₹100 spent on groceries, dining, and utility bills.
- American Express Platinum Travel Card: Earn 1.5 points per ₹100 spent on domestic purchases and 3 points per ₹100 on travel-related expenses.
- HDFC Regalia Credit Card: Earn 4 reward points per ₹150 spent on all purchases, with excellent travel-related benefits.
5. When Should You Choose Cashback?
- If you prefer simplicity and immediate value.
- If you’re not interested in tracking points and redemption options.
- If your spending is spread across many categories (groceries, fuel, shopping).
- If you want to earn cashback credit card offers that you can use immediately.
6. When Should You Choose Reward Points?
- If you spend a lot on dining, travel, or online shopping.
- If you prefer luxury benefits like travel upgrades, access to airport lounges, and exclusive deals.
- If you’re willing to track and maximize your points for higher value redemptions.
- If you want premium credit cards in India with access to valuable rewards.
Conclusion: The Right Choice Depends on You
Choosing between a cashback credit card and a reward points credit card ultimately depends on your spending habits and personal preferences. If you’re someone who enjoys immediate savings and doesn’t want to deal with complicated points systems, cashback cards are your best bet. However, if you enjoy redeeming points for luxury experiences and prefer flexible rewards, a reward points credit card will work better for you.
Both options can help you save money, but the best card for you depends on how you plan to use it. So, whether you’re looking for best travel credit cards in 2024 or want to maximize cashback on credit cards in India, carefully evaluate your spending habits and apply for a credit card online that aligns with your goals.
Ready to unlock savings? Apply now for the best cashback or reward points card and start earning!
By making an informed choice, you can enjoy the benefits of credit card rewards and maximize your savings for a financially rewarding year.