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Find out about the eligibility and types of transactions you need to conduct before redeeming reward points

The big spenders are expectedly pampered, with credit card issuers and merchant outlets showering them with discounts and freebies. In recent months, however, two private-sector majors—ICICI Bank and Axis Bank—have expanded their scope of offerings to cover the savers as well. While a plethora of freebies is being offered on a platter, on the flip side, there is the tedium of keeping tabs on the reward points and redeeming them. If you want to make the most of the loyalty programmes, you need to understand how they work and avoid the peril of over-spending.

How does it work?

The savings account holders in banks that offer reward point programmes do not have to make an effort to sign up for it since they are enrolled by default as soon as they open an account. The transactions include simple ones like activating Internet or mobile banking, opening a recurring deposit account, updating mobile number through an ATM, or registering for an e-statement. Then there are more complex activities like taking a loan, paying utility bills using the online payment platform, or even making an EMI payment on time.

To be eligible for the reward points, the retail customer needs to fulfil certain conditions. For instance, in the case of ICICI Bank, account holders are required to maintain a minimum monthly average balance of 15,000, while NRI customers are not eligible at all. The public-sector banks, however, are not rewarding their savings account holders and have largely limited themselves to card spends for now.

How to redeem reward points

While you earn 1 point for every 100 you spend online through Net or mobile banking with ICICI Bank, you can get 100 points for just activating these services. In the case of Axis Bank, you can earn 25 points for ordering a new cheque book online or via an ATM, but get 500 points when you open a Wealth or Privee account. How do you keep track of your reward points? Since ICICI Bank's points are managed by PAYBACK, the multi-brand loyalty programme, you can either get in touch with its contact centre/website, through the bank's website, or even via your account statement. To redeem points, you have to choose from the list of products or services published on the bank's website and call up the bank to communicate your decision. For Axis Bank, you can pick from 500 rewards from a range of lifestyle and entertainment products and services, provided that you have accumulated a minimum of 300 points.

Rewards on card spends

A high-end credit card is bound to offer a better spend-to- reward-point conversion ratio compared with a no-frills card. However, such cards typically entail a huge membership fee. Plain-vanilla cards may not levy a big fee, but could require you to make substantial purchases to be eligible for worthwhile rewards. Availing of cash-back offers is relatively easy as you have to simply swipe your card at the merchant outlets or make an online purchase and the applicable amount will either be credited to your account or the discount factored into the bill.

While both cash-back and reward point programmes seem attractive, it requires you to choose your bank or card, as well as rewards, carefully. So, if you watch movies or dine out often, pick a lifestyle card that offers additional points on such spending. On the other hand, cards or savings accounts that entitle you to, say, 5% cash-back on payment of utility bills will be useful for all segments as it is an unavoidable expense.

Ensure that you exercise caution while choosing cards for the cash-back benefits as banks and card issuers routinely revise their offerings. Besides, your spending pattern should justify the membership fee. The last thing you should do is to sign up for a card only to avail of the reward points or cash-back offers.

Many credit card users believe that hoarding a large number of points for years will help them buy an expensive product. However, the bank or card issuer usually specifies a validity period for redeeming the points. Check this or you may end up waiting for months only to find out that the offer period has expired.

5 questions to ask before you sign up for reward points

l Is it a limited period offer? l Does your spending pattern justify the annual fee? l Is it restricted to transactions with select merchants? l Does it exclude any spending categories such as the one on fuel? l For what can you redeem your points?

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