There is no denying the convenience of using a credit card as it is much safer than carrying wads of notes each time you step out. Credit cards prove useful when making high-value transactions. And, there is always the proof to rely on when you make payments through cards — they always leave behind a trail. In addition to all these benefits, credit cards offer you benefits in form or rewards or cash-back. Very often, we face a dilemma in choosing from a variety of credit cards available. Before going into their advantages, let’s try to understand how the different options work.
Rewards scheme is the oldest form of credit card benefits. Depending on the card you possess, points are credited into your account on each spend. Gold, platinum or privileged cards generally award more points per spend. While a normal card would earn one point on a spend of R150/125, a privileged card would earn one or two points for every R100 spent. A Citibank Rewards Card gives you one point on every R125 spent, whereas a Manhattan Platinum Credit Card by Standard Chartered offers you five reward points on R100 spent. However, not everyone can get a premium card: Stringent income criteria apply for issue of these cards.
Cash-back scheme is a more recent phenomenon. In this scheme, you get cash back on your spend. You get a predetermined percentage of cash back (generally 5%) into your credit card account. Once it reaches R500 of cash-back credit, the amount is credited to you. However, not all transactions qualify for 5% cash-back. For example, Citibank Cash Back credit card gives a 5% cash-back only on movie tickets, telephone and utility bill payments registered through CitiUtlity Bill pay, and on all other spends only 0.5% cash-back is given. Also an annual fee of R500 is charged. A cap of a maximum of R100 of cash-back for each month also exists.
Both cards have their own benefits. However, without making any cost-benefit analysis, one can’t say which one is better.
Let us make a comparison of spends of R75,000 on Citibank Cashbank credit card and Standard Chartered Platinum Rewards Credit Card. Chartered Platinum Rewards Card offers five reward points per R100 spent on dining, fuel and hotels and two points on all other categories of spend.
As the graphic shows, the rewards points card gives you 2,750 points