Credit Card Reward Points vs Cashback: Choosing the Right Option

Credit cards have become an essential financial tool for many individuals. They offer many benefits, including reward points and cashback offers. It is crucial to understand the differences between these two types of credit card and their respective benefits to make the most out of the credit card you choose to use. 

This article compares credit card reward points and cashback offers, helping Indian audiences decide which option suits them better.

Understanding Credit Card Cashback and Reward Points

Before diving into the comparison, it is important to understand what credit card cashback and reward points are. Cashback offers on credit cards give users a percentage of their spending as a refund. These offers are usually applicable only at specific partner outlets. Once the cashback amount is credited to your account, you can use it for any purchase. On the other hand, you can earn reward points on almost all transactions made using a credit card, depending on the minimum transaction requirements. These points accumulate over time, and you can redeem them for various products, services, or travel bookings the credit card provider offers.

Comparison between Credit Card Cashback and Reward Points

Here’s a detailed comparison between credit card cashback and reward points to help you make an informed choice:

Transaction: Cashback offers apply only to transactions made at specific brand outlets. At the same time, you can earn credit card reward points on various transactions, depending on the minimum requirement.

Fluctuations: Cashback percentages usually remain fixed, and changes occur when the offer reaches the maximum cashback limit. In contrast, reward points can fluctuate based on the transaction amount, allowing you to earn thousands of points as you increase or decrease your spending.

Validity: Cashback typically has no expiry date once credited to your account, providing flexibility in usage. On the other hand, reward points usually have a validity period of 2 to 3 years, varying across banks, after which they expire.

Usage: You can use Cashback anywhere to purchase any product once credited. In contrast, you can only use reward points to buy products available on the shopping websites of the respective bank.

Minimum Transaction: Some cashback offers may not require a minimum transaction, allowing you to earn cashback even on low-value purchases. To earn reward points, you will generally need a minimum transaction amount, typically starting at Rs 100, varying from bank to bank and credit card to credit card.

Calculation: Calculating cashback is relatively straightforward, as the offers clearly define the percentage. In contrast, reward points vary based on different transactions, making it challenging to calculate their exact value. For instance, you may earn other rewards on dining transactions compared to travel transactions.

Extra Bonus: Cashback offers typically do not provide additional bonuses once the cashback amount is credited. In contrast, some credit cards offer different reward points as a milestone bonus or when certain transaction limits are hit.

Frequency: Depending on the credit card, you can get Cashback immediately or after a specific duration, such as 90 days from the transaction date. Reward points, on the other hand, are usually reflected in your account immediately after the transaction is made.

Welcome Offer: Cashback is not typically offered upon credit card activation. Certain credit cards provide a welcome bonus in the form of reward points, which can be redeemed for shopping later. To get a good idea, ask the employees about what is credit card is before applying.

Choosing the Best Option: Cashback vs Reward Points

Selecting the right option between cashback and reward points depends on your preferences and spending habits. Consider the following factors:

  • If you frequently travel, a points card might be the best choice. Such cards offer opportunities to maximise redemptions and enjoy travel-related perks.
  • If you are loyal to a specific hotel or airline, consider opting for a co-branded card that offers benefits and rewards specific to that brand. If you prefer flexibility, a points card that allows redemption with various merchants would be more suitable.
  • Cashback cards are preferable for those seeking a no-fee rewards card. These cards offer simple rewards structure and can be a good choice if you do not travel frequently.
  • Several credit cards offer reward points and the option to redeem them for cash. If you desire the best of both worlds, consider finding a card that provides this dual benefit.

Also Read: Difference Between Credit Card and Debit Card


Both cashback and reward points have advantages, and many credit cards offer both options. By understanding the differences between these benefits, Indian audiences can choose a credit card that aligns with their needs, ensuring maximum savings and benefits. Understand what is a credit card, compare the options and make an informed decision when selecting your next credit card.


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