Cash back credit cards are increasingly becoming popular these days. Simply because such cards guarantee you a fixed amount of cash return on your spends, which usually varies from 1 to 5%, depending on the type of purchases made and the credit card you own. To be eligible to earn rewards, the card member has to make purchases/ payments through the card. The cash back is credited to your card account; although the percentage of cash returned may differ from transaction to transaction. Some cards also have overseas incentives: If one withdraws cash when abroad from an international ATM, one gets some cash back. Similarly, purchases made abroad also lead to cash back. Currently almost all major banks are offering cash back credit cards or are simply running cash back schemes on some of their cards, which may be good for consumers also. After all, getting something back is always better than getting nothing in return. Says Ashish Kapur, CEO, Invest Shoppe, “Intense competition amongst various credit card providers has made use of credit card by customers very beneficial and rewarding. Cash back offers, higher reward points, discounts at various restaurants and shops, convenience as well as attractive rates for medical insurance are some of the benefits which one can look forward to by using credit cards.” It, however, does not mean that cash back schemes are always a good deal, and you should go for them blindly. In fact, it always makes sense to use your brain as well as exercise some caution while opting for such schemes: 1. Read the fine print carefully: -If any cash back scheme has caught your attention, you first need to read the fine print carefully. Otherwise you may end up losing more than gaining anything. This happened with Ramesh Kumar, a Delhi-based IT executive. He recently went on a shopping spree. Not because he urgently needed all those stuffs, but because he had just read somewhere in an advertisement that he would get back as much as 10% of the total amount spent on his credit card during the promotion period. Ramesh ended with spends close to Rs 30,000 and was hoping to get at least Rs 3,000 as cash back. But, to his utter surprise, only an amount of Rs 1,000 was credited to his card account, and Ramesh felt outrageously cheated. But what had happened after all? In this case Ramesh had failed to notice in the ad that the maximum cash back limit was capped at Rs 1,000. So irrespective of the amount of purchases, he would have earned cash back only for expenditures undertaken up to Rs 10,000. Since Ramesh had overlooked, or chose not to read, the fine print, he himself was to blame for what he did, and not the bank running the scheme. 2. Applicability of the scheme: -You also need to know whether the cash back scheme is applicable on all the purchases you will be making or is limited to specific purchases only. This is important because unless you know it, you won’t be able to take the full advantage of any cash back card or offer. For instance, members of Standard Chartered Bank’s Super Value Titanium Card and Business Card are currently eligible for 5% cash back on petrol transactions and telephone bill payments, but only 1% cash back on all other purchases. Similarly, ABN AMRO Bank’s Titanium One Credit Card gives 1% cash back on monthly retail spends of up to Rs 5,000 and 2% cash back on monthly retail spends of above Rs 10,000. Thus, knowing the offer will only help you make the best use of your card. 3. Does the card insist on a minimum spend? : -It is very important to ascertain whether the bank insists that you spend a minimum amount every month to avail the benefit of the offer. If that is the case, it is better not to go for any such card or offer as that will slowly become a burden on you and may also land you into a debt-trap ultimately. 4. Swiping of the card: It is also important to know whether the credit card need to be swiped only on the concerned bank’s machine or the scheme is valid even if the transaction is made on any other bank’s machine. For instance, if you are holding an ICICI Bank credit card and the terms and conditions of the bank say that you need to swipe your card only on an ICICI Bank machine, then you won’t get any cash back if your card is swiped on an, say, HDFC Bank machine. So be careful about any such condition applicable to your card or any scheme. 5. Is it cash back or reward points? : -Sometimes, on some schemes, you are entitled only to reward points or vouches, and not to any cash back. Therefore, before making any purchase or going for any scheme, you need to ascertain whether the scheme involves actual cash back or it is in the form of reward points, vouchers, etc? Even if it is cash back, you need to know about the mode of payment. 6. Get the time period clarified: The time period within which you will get the money back is also very important. Usually the cash back on your card accumulates on a monthly basis and reflects in your monthly card statement under Your Savings summary. To credit the accumulated amount of cash back into your account, you usually need to call on the helpline. But if there is any restriction on the time period or getting the money back, you should first get it clarified with the bank. If in doubt, avoid any transaction. 7. Don't deal with a DSA: -As an added precaution, you should deal with a bank official and not a Direct Sales Agent (DSA). Even if you are dealing through a DSA, you should get all the facts verified by talking to a bank official as well. 8. Never use cash back as an excuse to spend: If you are using cash back as an excuse to spend on what you normally won’t, then it is much better to surrender the concerned card and go for cash purchases instead. Anyway, cash is always the king!
