Credit card- Reward Points

Rewards of loyalty

Friday October 27 2006 15:36 IST

Sandeep Singh

Sachin Deshwal, a construction contractor in Noida, runs up a bill of Rs 10,000 a month on his credit card. Although this young bachelor has several cards, he uses his ICICI Bank card more frequently than the others, as a result of which he had accumulated a good number of reward points. Last week, Deshwal pored through the ICICI Bank gifts catalogue, and picked out a Yukai-Mustek Handycam, for 2,000 points and Rs 4,500. Says Deshwal: “I like the concept of reward points. I think I got a great deal.” We think, maybe not. It’s easy to feel like Deshwal does because the handycam is a freebie, an unexpected bonus. The tendency is to not even impute a cost to such reward point-related freebies from card-issuing banks. But if you did, you’d find that you are not really getting a steal. Further, in the way the market is evolving, the best value-for-money credit cards are not those offered by banks, but the new breed of loyalty cards being launched by big business houses, which straddle many products and services. Intense competition has turned a credit card into a commodity. Every bank has a card, and increasingly the joining fee and annual fee are being waived off for entry-level cards. The rate of interest charged on rollovers is similar (usually, exorbitant) and reach is not a problem. In other words, what you can do with, say, an ICICI Bank card, you can do so with an SBI or Canara Bank card too. So, issuers are trying to differentiate themselves through value-adds, the chief one being reward points. For every Rs 100 you spend on the card, banks give you a small amount Rs 0.50-2 on entry-level cards, Rs 3-6 on value-add cards as a bonus. Banks express this bonus in reward points, but it’s not necessary that one point equals Re 1. Sometimes, it is equal to 50 paise, some banks don’t even state the monetary value of a reward point. Typically, the points you accumulate can be reimbursed to buy gifts from your bank or get shopping vouchers. Here is where banks show their ingenuity and sometimes, be a source of irritation to you. Some banks give gifts, but it’s usually a combination of reward points and some cash, which is charged to your card. It can be annoying to know that the only chance you have to encash your reward points is if you pay more. Says Vijay Bobba, chief executive officer, Loyalty Solutions and Research: “About 70-80 per cent of reward points earned are never redeemed, as most cardholders don’t manage to hit the minimum typically, 500 points or lose interest in the structure.” Some banks like ABN AMRO give you gift vouchers, which is definitely better if you don’t want to spend additional money to redeem. However, invariably, these vouchers are all spending-oriented things like shopping, travel and restaurants. No bank lets you use the points to pay essential bills. This is where the new breed of loyalty cards score. Loyalty cards are essentially co-branded cards done on a larger scale. Typically, co-branded cards entailed tie-ups between a bank and a seller for instance, ICICI Bank and HPCL, ABN AMRO and Barista or a handful of sellers. Loyalty cards increase the number of partner products and services manifold, giving you higher reward points and more useful reimbursement options, and do away with the need to carry a wallet full of cards. Earlier this year, Tata and Maruti launched their loyalty cards. Last week saw the launch of Reliance Credit Card, from the Reliance ADA (Anil Ambani) Group, in partnership with Citibank. The Tata Card (with SBI Cards), for instance, gives more reward points Rs 4 per Rs 100 as an introductory offer, and Rs 1-6 subsequently at any of its 17 partner brands, which cover utility providers, financial service sellers, shopping outlets, petrol pump and airlines, and probably more in the near future. The same is the case with the Reliance Card. On all other spends, you continue to earn the reward points a normal credit card would earn. Moreover, you are not constrained to use the reward points accumulated to buy gifts you don’t need or which require you to pay more. Chances are, you can use it to pay utility bills. For instance, if you reside in South Delhi or use a Reliance phone, you can use the reward points accumulated on the Reliance card to pay those bills. The shift from co-branded towards multi-brand loyalty cards is only expected to gain pace, even see innovation. Earlier this year, Loyalty Solutions and Research launched a loyalty programme called the I-mint card. This is only a rewards card, it doesn’t double up as a payment card. When you shop at any of the partner brands (at present, six) or outlets (3,500-4,000) across the country, getting your I-mint card swiped will fetch you 1-30 reward points (monetary value not stated), which can be used to buy gifts or for vouchers. Says Bobba: “The trend is towards helping customers earn significant number of points in quick time.” And that’s only good for you. Loyalty pick Tata Card Charges: Annual fee of Rs 500 for Privilege Card, Rs 1,000 for Premier Card, though vouchers for an equivalent amount can be redeemed at partner brands Partner brands: Tata Group (Tata Motors, Voltas, Tata AIG, Westside, Star India Bazaar, Landmark bookstores, Taj Hotels, Titan, Tanishq, NDPL, VSNL, Tata Indicom) and others (Indian Airlines, Jet Airways, Air India, BPCL and India Today) Reward points: Rs 1-6 on partner brands, 1 per cent on other spends Reliance Credit Card Charges: Free for life Partner brands: Reliance ADA Group (Adlabs, BSES, Reliance Communications, Reliance Insurance) and others (IOC) Reward points: Not available Maruti Autocard Charges: Free for life Partner brands: Maruti, IOC Reward points: Rs 1.5-6 on partner brands, 1 per cent on others.

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