Banks advertising cash back & reward points schemes but read the fine print

Banks in order to encourage customers for more spending, they are giving cash back offers and reward points on credit cards. Advertisements can be seen like 'Shop using your credit or debit card and get Rs300 off' or 'Get up to 3% cash back on your card transactions'. The credit card head of a foreign bank pointed out, “Though cash backs and reward point schemes existed all through, they have become more aggressive".

Some of the banks such as Citibank, HSBC, Corporation Bank, Deutsche Bank and HDFC Bank are offering cash backs or reward points. Although some of the offers have got closed on October 31, but few of the schemes have been extended up to the end of 2009.

Ravi Subramanian, head of consumer assets, HSBC, informed, "Points and cash backs bring loyalty for a card company. Reward points are good for inducing spends, and cash backs work in the short run."

Subrat Pani, head of the credit card division at Kotak Mahindra Bank, while explaining why schemes are in full bloom said, "When new card acquisitions have slowed down, you have to focus more on the existing base."

The credit card holders should be careful, before going for these offers they should read the fine print of cash back schemes. In the fine print banks mention the limitation on the amount of purchase and on the cash back or points per transaction on a per month basis. According to the promotional material of a credit card, "The minimum transaction amount for cash back on fuel and telecom is Rs500, and Rs1,000 for other categories. The maximum cash back per transaction is Rs150 and maximum cash back per month per customer is Rs500". As per this amount restriction, it might not be the right decision to make purchases to earn cash back.

According to another card issuer cash backs is offered only if used "for purchases worth Rs250 or more before your second statement is generated". In case you do not know about your bill generation cycle and do purchasing after that period, your cash back will be invalid.

Regarding reward points banks advertise of doubling the number of reward points, as compared to earlier, but card holders should make note of the conversion ratio of rupee per point as some of the banks have reduced it.

Past eight months back, most banks offered 40paise per reward point. Now the ratio has been reduced to 20-30paise, informed a banker. But banks deny this.