While there are multiple benefits of owning a credit card, cashback, reward points and miles are very popular amongst the users these days. Millions of people have started using credit cards just to enjoy credit limits while some use them for earning reward points and cashback offers. Nowadays, people have started opting for cards on the basis of such add-on benefits. You might have noticed that a few credit cards say that you can earn 1 reward point for a certain amount of transaction while the others say that you can enjoy a particular % of cashback and some say that you can earn Miles while spending through your credit card. But have you actually ever wondered what is the difference between cashback, rewards and miles. If you are a frequent credit card user, it is very important for you to understand the difference between the three so that you can make optimum use of your credit card.
Lets Discuss – Cashback Vs Reward Points Vs Miles Credit Card
|Basis of Difference||Cashback||Reward Points||Miles|
|Meaning||It refers to a benefit that the cardholder is entitled to get in a small percentage on the amount spent on the purchases through credit card.||It is an added advantage that the cardholders are entitled to receive every time you make a purchase through your credit card.||It is also a type of loyalty benefit that the credit card holders get as a reward in return for the spendings done through the credit card.|
|Redemption||In case of cashback, actual cash is credited to the cardholder’s account and this cash can be used for either paying off of the credit card bill or for some personal purpose.||These points can be redeemed against various options such as flight and hotel bookings, e-vouchers or by choosing products from the Product Catalog offered by the bank and can be redeemed against cash as well.||The Miles earned can be redeemed towards booking flights through your card issuer’s booking tool. In case of a co-branded credit card, you will have to book flight tickets of the particular airlines through their website, and redeem the miles you have earned.|
Now that we have understood the basic difference between the three, let us now compare a few cards that fall under these categories to make our concept even more clear –
Cashback Credit Cards
Cashback Credit Cards are the cards in which the benefits of using the card are credited in the form of actual cash. These cards provide the cardholder with cash for each eligible purchase made by them using this card. There are several cashback credit cards in India but the ones which we are going to compare are – Amazon Pay ICICI Card and Flipkart Axis Card. Both these cards are co-branded credit cards. These are the entry level credit cards. That is why it will be justified to have a comparison between the two.
|Basis of difference||Amazon Pay ICICI Bank Credit Card||Flipkart Axis Bank Credit Card|
|Joining Fee||Nil||Rs. 500|
|Renewal Fee||Nil||Rs. 500 (can be waived off if your annual spends cross Rs. 2 Lakhs in the previous year)|
|Dining Benefits||15% discount on your dining bills at over 2500 + restaurants through Culinary Treats Program||20% off at partner restaurants in India with Axis Bank Dining Delights|
Rewards Credit Cards
Rewards Credit Cards generally offer Reward Points for every purchase that you make through your credit card. The amount of Rewards Points that will accumulate in your account will depend on the card variant you use and on the category you spend in. Now let us have a quick comparison between the 2 entry level Rewards Credit Cards for better understanding – SimplyCLICK SBI Credit Card and AmEx SmartEarn Credit Card.
|Basis of Difference||SimplyCLICK SBI Credit Card||American Express SmartEarn Credit Card|
|Joining Fee||Rs. 499||Rs. 495|
|Renewal Fee||Rs. 499 (reversible upon crossing spends of Rs. 1 Lakh in the previous year)||Rs. 495 (waived upon spending Rs. 40,000 in the previous year)|
|Welcome Benefits||Amazon gift card worth Rs. 500||Rs. 500 as cashback on spending of Rs. 10,000 in the first 90 days of card issuance.|
|Milestone Rewards||E-voucher worth Rs. 2,000 from ClearTrip on annual spends of Rs. 1 Lakh and 2 Lakhs each.||Amazon voucher worth Rs. 500 on annual spends of Rs. 1.20 Lakhs, Rs. 1.80 Lakhs and Rs. 2.40 Lakhs each|
Miles Credit Cards
In Miles Credit Cards, you are generally rewarded with Miles of the partnered airlines of the bank. This is a kind of loyalty benefit given to the customers by the bank for using their credit card. Let us have a brief comparison between mid-level miles credit cards so that we can have a more clear concept in our mind about the Miles Credit Cards – 6E Rewards XL IndiGo HDFC Bank Credit Card and Axis Bank Atlas Credit Card.
|Basis of Difference||6E Rewards XL – IndiGo HDFC Bank Credit Card||Axis Bank Atlas Credit Card|
|Joining Fee||Rs. 2,500||Rs. 5,000|
|Renewal Fee||Rs. 2,500||Rs. 5,000|
||You get 5,000 Edge Miles on completing 3 transactions within 90 days of joining card membership.|
|Milestone Rewards||As a milestone benefit, you get 1 complimentary IndiGo Air Ticket worth Rs. 3,000. This is rewarded after you make 3 or more transactions in each of the first 3 months from the card set up date.||You are entitled to get 2,500, 5,000 and 10,000 bonus Edge Miles on achieving spend based milestones of Rs. 3 Lakhs, Rs. 7.5 Lakhs and Rs. 15 Lakhs respectively.|
|Rewards Redemption||The reward points earned in the form of 6E rewards can be redeemed on the IndiGo 6E portal towards the IndiGo 6E Rewards’ Benefits which includes IndiGo flight bookings.||
Now that we have understood the major differences between cashback, rewards points and miles cards, we can choose a card which will be best suitable on the basis of our spending habits. One one hand if you are looking for a credit card that can offer you benefits across all your spendings, cashback credit card will be a good option. Also these cards are better to understand and can be a good option for the newcomers.
While on the other hand, if you are a person who is specifically looking for a card in which reward points can be earned on your particular spendings, then you can go for a rewards credit card. For example if you travel often or dine out quite often, then a credit card that specifically offers rewards on traveling and dining respectively can be a good option.
Thirdly if you are a frequent flyer, you should opt for miles card as in those cards you get rewards in the form of miles which can then be redeemed against flight booking of the banks’ partnered airlines.
Hence it is your own responsibility to understand your spending habits and then search for a card that gives you maximum benefits on the basis of your needs and demands. Make sure to go through all the benefits and features of the credit card before you opt for one. You should select such a card that will help you in maximizing your savings.