First, What Are Reward Points?
Think of reward points as a 'thank you' from the bank for using their card. For every eligible purchase you make, the bank gives you a certain number of points. These points are a loyalty currency that accumulates in your account. Typically, you might
earn 1-2 points for every ₹100 or ₹150 you spend. Once you have collected enough points, you can redeem them for various items like shopping vouchers, gadgets, flight tickets, or even get a credit back on your statement. The basic idea is that a small percentage of every transaction is returned to you.
Cashback: The Simplest Reward
For beginners, cashback cards are often the easiest to understand and use. Instead of collecting points, you get a direct percentage of your spending back as cash, which is usually credited to your monthly statement. Some cards offer a flat cashback rate (e.g., 1% on all spends), while others provide higher rates for specific categories like online shopping, utility bills, or dining. For instance, the Axis Bank ACE Card offers accelerated cashback on bill payments made via Google Pay and on food delivery apps like Swiggy and Zomato. This straightforward approach provides predictable savings without the hassle of tracking point values or redemption catalogues.
Travel & Lifestyle Points: For the Aspiring Globetrotter
If you are someone who loves to travel or dine out, a points-based card might be more lucrative. These cards often have partnerships with airlines and hotel chains, allowing you to convert your points into air miles or hotel stays. While this can offer a much higher value per point compared to cashback, it requires more effort. You need to understand transfer partners and be strategic about redemptions. For an entry-level job holder, it is crucial to honestly assess your travel frequency. A card offering great hotel benefits is not very useful if your primary spending is on groceries and local transport.
Co-Branded Cards: Loyalty to a Favourite Brand
Co-branded cards are created in partnership with specific brands, such as the Amazon Pay ICICI Bank Credit Card or the Flipkart Axis Bank Credit Card. These cards offer the highest rewards when you shop with that partner brand. For example, the Amazon Pay card offers Prime members up to 5% cashback on Amazon purchases. The major benefit is accelerated earnings on platforms you already use frequently. The downside is that the rewards are often less valuable when used outside of that specific brand's ecosystem, making them less flexible than a standard cashback or points card.
How to Choose Your First Card
As a beginner, prioritize cards with low or zero annual fees. Many entry-level cards in India are 'lifetime free' or waive the fee if you meet a minimum spending amount annually. Check the eligibility criteria, as most cards require a minimum monthly income, typically starting from ₹15,000 to ₹25,000. Most importantly, align the card’s primary benefit with your actual spending habits. If most of your money goes towards online shopping, a card like the SBI SimplyCLICK or HDFC Millennia could be a good fit. If you have no credit history, consider a secured card backed by a Fixed Deposit (FD) to start building your score.
Common Traps to Avoid
The biggest mistake is spending more just to earn rewards. The interest charged on a revolving balance, often 36-42% annually, will always be far higher than any rewards you earn. Always aim to pay your bill in full and on time. Missing payments not only attracts late fees but also damages your CIBIL score, which is crucial for future loans. Also, avoid the temptation to apply for too many cards at once, as this can negatively impact your credit score. Finally, read your monthly statement carefully to track your spending and check for any unrecognised charges.
