Also, check that if the card company has this condition of “minimum monthly spend” to get enrolled in the cash back scheme. For example ICICI had this cash back offer, which had the stipulation of minimum transactions and amount (Rs 2,000) to be eligible for cash back.
Maximum advantage
Often there is a cap on the maximum cash back that you can avail. For example, HSBC had this cash back scheme, where the maximum cash back that you can get was Rs 1,000. So, if you had done say a transaction of Rs 2,000 in a month, even after fulfilling all the terms and conditions, you’ll still be getting only Rs 1,000 at the end of the month.
Debt trap
Sometimes the cash back offers can lead you to a debt trap. Consider this, a XYZ card has a scheme where the value of cash back increases if you don’t pay your statement-ending bill in full and carry the amount forward. Example: If you carry forward Rs 5,000 in the next billing cycle, you get a cash back of 2% but if you carry forward an amount above Rs 5,000 you’re entitled to get a cash back of 5%.
“On the face of it, this may appear as a true-value scheme but what your forgetting is the financial charges, which will accrue on the remaining balance and can be much higher than what you’ll get back,” warns Milind Rai, a certified financial planner.
Cash withdrawal
There are schemes which offer a cash back when you withdraw money on your credit card. However, this is not advisable as cash withdrawals on credit card incur a transaction fee and the interest on the amount withdrawn is calculated at a higher percentage.
Though credit card companies also have a rewards point system where you can earn rewards and redeem them, it’s cash back which attracts cardholders the most. “Customer prefers cash back offers to reward points as cash back ensures instant gratification. Another limitation is that the customer may not get the gift of his liking,” says Prasad.
So before you lap up the new cash back scheme to ensure optimal utilisation of your card, it’s necessary to have complete information about the benefits as well as the conditions attached with any such offer. After all it’s about your money, whether you earn to spend or spend to earn.
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