Reward Points: Are They Worth the Spend?
Do you frequently shop to earn reward points? Before diving into enticing offers like "Get 5 times reward points this weekend!" or "Earn bonus points during festivals!", it’s crucial to consider the real value of these points. Often, we find ourselves buying unnecessary items simply because we believe we’re gaining something "free" in return.
Let’s break down the math: Typically, credit cards offer 1 reward point for every ₹100 to ₹150 spent. When redeeming, 1 point is usually valued at around ₹0.25. For instance, to obtain a ₹1000 shopping voucher, you would need to accumulate 4000 points, requiring a staggering spend of ₹6,00,000, assuming an average earning rate.
Now, consider the disadvantages:
1. Unnecessary Spending: Chasing after points may lead you to purchase items you don’t need. Spending ₹5000 for 1000 points (worth ₹250) results in a net loss.
2. High-Interest Burden: If you carry a balance, the interest can quickly outweigh any benefits. For instance, a ₹20,000 spend could yield only 133 points (worth ₹33), while accruing interest of ₹700 in a month—an unsustainable loss.
3. Complicated Terms: Many points expire within 1-2 years, and fees may apply during redemption. Additionally, there might be limits on points earned monthly.
4. Devaluation Risk: Banks can reduce point values without notice, eroding your potential benefits.
So, are reward points entirely pointless? Not necessarily! To maximize their value, spend only what you would normally purchase. Use reward points wisely to turn potential losses into gains.
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