 "Better to use reward points for gift vouchers")
One can't argue on the convenience and advantages of credit cards. It is much safer than carrying bundles of notes each time you step out, of course with due caution. Credit cards prove useful when making high value transactions. But one advantage that most people overlook is the reward points, and how to use them.
Reward schemes are the oldest form of credit card benefits. Depending on the card that you have, points are rewarded on your spends. Gold, platinum card or privileged cards generally award more points per spend. While, a normal card would earn one point on spend of Rs 125 or Rs 150, privileged cards would earn one or two points for every Rs 100 spent.
Reward points are redeemed against some benefit after having been accumulating them in sufficient numbers. One of the main questions for cardholders is: for what should the reward points be used? The broad choice lies between using them to purchase gifts or a gift voucher. The two encompass many similarities and differences. Several factors will help you make the correct decision.
Manner of utilising reward points: The simplest way to utilise the accumulated reward points is to redeem them against the various gifts listed in the bank's catalogue. The various categories listed by banks range from apparel to magazines, with the number of points stated against the specific item listed. Thus, a subscription to a magazine could carry 1,200 points or a hot iron 850 points and so on. Different categories of credit cards (gold, platinum, signature) could have different redemption structures - in terms of points required and kinds of gifts. Your bank's relationship manager will be able to provide the exact details.
The other way of redeeming the points is to purchase a gift voucher at one of the several leading stores both single brand and multi-brand across the country. Thus, the reward points are exchanged for gift vouchers (for instance, a Rs 500 voucher for 750 points) to be utilised for purchases at that store.
Obviously, a gift item can be purchased using a gift voucher or through redemption of reward points. Here are some parameters to consider while redeeming these points.
Choice: In the matter of choice, in terms of the number and variety of items available, utilising a voucher would turn out to be better. This is because a list at a bank would be rather restricted. With a gift voucher the possibilities are unlimited in the sense that one can purchase virtually anything stocked in a store. This would make a difference when a decision about what needs to be purchased is uncertain and browsing through what is available is necessary. Hence, a person in such a case is free to choose and buy what he likes amongst the various choice available.
Availability: This can be an important parameter while planning to utilise the reward points. If a decision has already been made about something that needs to be purchased and if it is available in the list with the bank, the situation is made easy. It is good because it may so happen that if you choose to take the gift voucher route there are chances that you may not find a particular item when you go to buy it. Hence, there is a level of uncertainty whether an item would be available in a store and the one you had been wanting to buy. The reverse could also be true; so this is a factor that can change the overall decision about the manner of purchase.
Reward points spent: The whole idea for any individual should be to obtain the most from their reward points. An easy way to do this is to look at comparable items and see how many points are spent. For instance, a specific shoe from a leading brand available for, say, Rs 2,000 could be redeemed against the reward points already secured. Against this, the cost of the shoe in the open market might be Rs 1,500. If the store for this brand offers a voucher of Rs 500 for 600 points, the same item can be purchased by spending 1,800 points to obtain a voucher for Rs 1,500. In this case, the voucher route leads to spending fewer points while one still ends up with the same item one was looking for.
In this sense such comparison is important as it enables one to get a proper view of the whole situation and make a sound decision. Hence, make sure what is on offer on your card and how the reward point is structured.
Additional expense: In the search for a specific gift at redemption, an added element could arise along with reward points in the form of the extra amount to be paid.
To get a gift of, say, a perfume, the requirement is to redeem 1,500 points plus pay Rs 249. This extra amount should be included in overall calculations. Compared to this, any payment for redemption of a gift voucher would also include calculation of the amount of the actual item and any additional amount to be paid over the voucher amount. So if the value of an item is Rs 1,600 and gift vouchers of Rs 1,500 are taken, there is an additional Rs 100 involved. In effect, the final cost using both the points and the additional amount would need to be taken into consideration for a right decision.
WHILE REDEEMING REWARD POINTS
* Points are rewarded depending on the type of card you have
* Gift voucher offers greater choice of items for redemption
* Look at the actual number of points spent for redemption
* Any additional amount spent should be included in the calculations
Reward schemes are the oldest form of credit card benefits. Depending on the card that you have, points are rewarded on your spends. Gold, platinum card or privileged cards generally award more points per spend. While, a normal card would earn one point on spend of Rs 125 or Rs 150, privileged cards would earn one or two points for every Rs 100 spent.
Reward points are redeemed against some benefit after having been accumulating them in sufficient numbers. One of the main questions for cardholders is: for what should the reward points be used? The broad choice lies between using them to purchase gifts or a gift voucher. The two encompass many similarities and differences. Several factors will help you make the correct decision.
Manner of utilising reward points: The simplest way to utilise the accumulated reward points is to redeem them against the various gifts listed in the bank's catalogue. The various categories listed by banks range from apparel to magazines, with the number of points stated against the specific item listed. Thus, a subscription to a magazine could carry 1,200 points or a hot iron 850 points and so on. Different categories of credit cards (gold, platinum, signature) could have different redemption structures - in terms of points required and kinds of gifts. Your bank's relationship manager will be able to provide the exact details.
The other way of redeeming the points is to purchase a gift voucher at one of the several leading stores both single brand and multi-brand across the country. Thus, the reward points are exchanged for gift vouchers (for instance, a Rs 500 voucher for 750 points) to be utilised for purchases at that store.
Obviously, a gift item can be purchased using a gift voucher or through redemption of reward points. Here are some parameters to consider while redeeming these points.
Choice: In the matter of choice, in terms of the number and variety of items available, utilising a voucher would turn out to be better. This is because a list at a bank would be rather restricted. With a gift voucher the possibilities are unlimited in the sense that one can purchase virtually anything stocked in a store. This would make a difference when a decision about what needs to be purchased is uncertain and browsing through what is available is necessary. Hence, a person in such a case is free to choose and buy what he likes amongst the various choice available.
Availability: This can be an important parameter while planning to utilise the reward points. If a decision has already been made about something that needs to be purchased and if it is available in the list with the bank, the situation is made easy. It is good because it may so happen that if you choose to take the gift voucher route there are chances that you may not find a particular item when you go to buy it. Hence, there is a level of uncertainty whether an item would be available in a store and the one you had been wanting to buy. The reverse could also be true; so this is a factor that can change the overall decision about the manner of purchase.
Reward points spent: The whole idea for any individual should be to obtain the most from their reward points. An easy way to do this is to look at comparable items and see how many points are spent. For instance, a specific shoe from a leading brand available for, say, Rs 2,000 could be redeemed against the reward points already secured. Against this, the cost of the shoe in the open market might be Rs 1,500. If the store for this brand offers a voucher of Rs 500 for 600 points, the same item can be purchased by spending 1,800 points to obtain a voucher for Rs 1,500. In this case, the voucher route leads to spending fewer points while one still ends up with the same item one was looking for.
In this sense such comparison is important as it enables one to get a proper view of the whole situation and make a sound decision. Hence, make sure what is on offer on your card and how the reward point is structured.
Additional expense: In the search for a specific gift at redemption, an added element could arise along with reward points in the form of the extra amount to be paid.
To get a gift of, say, a perfume, the requirement is to redeem 1,500 points plus pay Rs 249. This extra amount should be included in overall calculations. Compared to this, any payment for redemption of a gift voucher would also include calculation of the amount of the actual item and any additional amount to be paid over the voucher amount. So if the value of an item is Rs 1,600 and gift vouchers of Rs 1,500 are taken, there is an additional Rs 100 involved. In effect, the final cost using both the points and the additional amount would need to be taken into consideration for a right decision.
WHILE REDEEMING REWARD POINTS
* Points are rewarded depending on the type of card you have
* Gift voucher offers greater choice of items for redemption
* Look at the actual number of points spent for redemption
* Any additional amount spent should be included in the calculations
The author is a certified financial planner