The Shifting Value of a Reward Point
Not all reward points are created equal, and their value is not fixed. A point’s worth in rupees can vary dramatically depending on how you redeem it. For example, 1,000 points might be worth ₹250 as a statement credit but could fetch ₹500 when transferred
to an airline partner. Banks frequently change these redemption values, a trend known as devaluation. The year 2026 saw a significant wave of devaluations across major Indian banks like HDFC, Axis Bank, and SBI, where redemption ratios were diluted and popular travel partners were removed. Before chasing points, calculate the ‘rupee per point’ value for redemptions you will actually use. If a voucher costs 2,000 points for a ₹500 value, each point is worth just 25 paise. This simple calculation reveals the true return on your spending.
The Annual Fee Break-Even Point
Premium credit cards lure users with high reward rates and perks like lounge access, but they come with annual fees ranging from ₹500 to over ₹12,500. The critical question is whether you can extract more value in benefits than the fee you pay. To determine this, you must calculate your break-even point. Estimate the monetary value of the rewards you expect to earn in a year based on your typical spending, plus the value of perks like lounge visits or golf games. If this total value is less than the annual fee, the card is a net loss for you. Also, be wary of cards advertised as “lifetime free,” as this may only apply if you meet certain annual spending targets, which might encourage overspending.
The Fine Print: Exclusions and Capped Earnings
A card might advertise 5% cashback, but the fine print often reveals significant limitations. Banks are increasingly excluding entire categories of spending from their rewards programs. Common exclusions now include rent payments, insurance premiums, utility bills, education fees, and government transactions. Furthermore, many cards impose monthly caps on how much cashback you can earn. For instance, the popular SBI Cashback card now has a monthly cap, limiting the total benefit for high spenders. These caps and exclusions mean your effective reward rate is often much lower than the headline number, making it crucial to read the terms and conditions carefully.
Lounge Access and Other 'Free' Perks
Complimentary airport lounge access is a major selling point for many cards, but this perk has become increasingly conditional. Where unlimited access was once common, many banks now require a minimum quarterly spend (e.g., ₹50,000 or ₹60,000) to unlock just one or two lounge visits. Issuers like Axis Bank and HDFC Bank have tightened these rules significantly. This trend reflects a broader recalibration where benefits are being reserved for higher-spending customers. Before choosing a card for its lounge access, verify the spending conditions and the number of visits allowed per quarter to ensure it aligns with your travel frequency and budget.
Redemption Hurdles and Point Expiry
Accumulating points is only half the battle; redeeming them can be another challenge. Banks may limit how many points you can redeem in a single month or mandate redemptions in specific multiples, making it difficult to use smaller balances. Some transfer partners for air miles may be dropped without notice, trapping your points in the bank's less valuable ecosystem. Moreover, points aren't forever. They often come with an expiry date, and if your card account is closed, you could forfeit your entire balance. A good rewards strategy involves not just earning points efficiently but also having a clear and timely plan for redeeming them for maximum value.
The Hidden Costs That Erase Rewards
Finally, the value of your rewards can be quickly wiped out by hidden fees and high interest charges. Withdrawing cash using a credit card, for example, is incredibly expensive, attracting a cash advance fee of 2.5% to 3.5% plus immediate interest charges that can exceed 40% annually. Similarly, foreign transactions often incur a markup fee of up to 3.5%. The most common trap is paying only the minimum amount due, which allows interest to accumulate at rates of 36-48% per year, turning a useful tool into a significant debt. Responsible usage—paying the bill in full and on time—is the only way to ensure your rewards remain a genuine benefit.
