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Research: Credit card rewards - what, where, how and when? -

In recent days, usage of credit cards has become a part of life. To attract more customers, many credit card companies have started offering credit card rewards based on the usage of the card. These rewards are offered in the form of reward points added with credit card or additional reward cards for prospective customers. Reward cards or reward points can be redeemed during shopping, booking a flight or hotel, restaurant, etc. Limitations and benefits of the rewards vary from card to card depending upon the credit card company. Most companies levy interest, transaction fee, or annual fee for usage of their reward or the redemption. Reward cards are not usually issued with lower APR rates as that of standard credit card.

Rewards are issued in different manner and include frequent flyer card, cash back, hotel reward, miscellaneous reward, travel rewards, retail rewards, etc. Frequent flyer mile cards are the most renowned programs offered by credit card companies. Accumulation of points can be used for booking a flight and additional travelling benefits. Other rewards are issued in form of redemption at shopping centre; cash back offer, etc.

Reward program has been considered a debatable topic with respect to income tax as the rewards are taxable in the hands of the customer. Since the rewards are issued to the customers as an additional benefit for the expenses incurred, it is considered as rebate. As the rebates are not taxable, reward programs in nature of rebate are also exempted from tax.

Festivals and expenses are inseparable twins. To invite more customers and to utilize the credit cards for meeting the expenses, both credit card companies as well as shopping malls offer huge discounts, attractive schemes, reward programs, etc. To increase the usage, credit card companies have tied up with several brands of products offering tempting discounts, free gifts, cash back offers, financing options etc. The festive season rewards cards or programs benefitting the credit company with the increased usage, benefits the buyer as the products are available at lower price and also the seller in terms of higher sales figure.

A good credit card reward should include the following:

Rewards should be allocated in the form of reward points and good rewards will be extended with bonus points such as a double point on selected shops or on purchase of selected items. Since the rewards are not offered at the prevailing APR rates, it should be offered with the reasonable rate of interest. Many rewards are charged with annual fees, late fee, transaction fee etc., as the card rewards are issued as a promotional offer, levying of these additional fees has to be ignored. The customer should be extended with the service for redemption of credit card rewards with good online banking facility, free alerts, alerts on other benefits, good customer support, etc.