Growing competition among credit and debit card issuers has led to several innovations that have greatly benefited the customers. After doling out 'free for life' cards, 'cash back' offers are now their new mantras. Of course, the bottom line is that they want you to spend, spend and spend.
These cash back offers are on almost all kinds of expenditures. That is, besides spends on shopping and eating out, even balance transfers and bill payments are eligible. And you can have fun through these offers as well. Let us look at some samples.
Almost all the travel portals have tie-ups with some bank. For instance, ezeego1.com offers 50 per cent cash back for platinum, 25 per cent on gold and 15 per cent on silver cards. However, you need to have an ICICI Bank credit card to get the benefit. Travelguru.com has a similar offer on Visa cards.
Also, this offer is limited to tickets booked only on certain airlines and only on the 'basic fare' (and not any airport taxes and levies) is eligible for such cash back. The portal is also offering a flat 10 per cent money back for bookings made in select hotels abroad, irrespective of the type of credit card. But there is a maximum cash back ceiling of Rs 20,000 per card.
Then there is makemytrip.com which has a tie-up with HSBC credit card and offers a 3 per cent cash back on domestic airline tickets, 5 per cent on international airline tickets and 10 per cent on hotels and holiday packages.
Holders of HDFC Bank gold card can get 5 per cent back on railway tickets purchased at the Indian Railways website www.irctc.co.in. ICICI Bank has an offer of 30 per cent back (For both credit and debit cards) for specially designed holiday packages to Malaysia. Since all banks want to encourage internet usage, they are dangling carrots of Rs 50 to 250 for online payments.
Sounds swell doesn't it? But before you get into the buying mood remember to look at a few pointers:
The amount of cash refunded varies from bank to bank. It usually ranges from 1 per cent to 5 per cent. Also, there are ceilings on the amounts refunded. For instance, HSBC has a cash back limit of Rs 1,000 for online transactions.
Many banks offer this incentive for a fixed period only, say during festive seasons. However, there are certain cards which are positioned as cash back credit cards. For instance, Citibank or SBI's cash back cards provide you with this facility all through the year. However, there are some annual fees on such cards.
Many banks have a pre-set list of establishments which are in the approved list of the banks. The offer is only available to you, if you spend in such places. It is therefore important to check whether that particular establishment is on the approved list of the bank. For instance, in case of HDFC credit cards, you can get a refund of 2.5 per cent of the amount spent at Bharat Petroleum (BPCL) petrol pumps only. Nowadays, certain banks do not include restaurants in their approved list as they would like the expenses to be larger in nature.
The minimum value of each transaction that will qualify as 'spend' also varies from bank to bank. For instance, the HSBC debit card has a threshold limit of Rs 2,000 per transaction.
Certain banks offer this incentive only if the card is swiped on their electronic data capture terminal (EDCT) (commonly known as the swiping machine). ICICI Bank usually has this rider for many of its cash back offers.
These offers work like reward points for making purchases. However, all reward point programs demand a minimum accumulation of points, unlike many cash back programmes. Also, there is more latitude in the latter, as the amount accumulated can be used for any transaction, unlike the former where the points can be redeemed only on the purchase of certain products.
The writer is a certified financial planner.
