By Vineet Kumar 
Cashback credit cards have become increasingly popular, especially among younger consumers eager to earn a bit back from their daily spending. But what exactly are they, and how can you make the most of them without getting carried away?
What Are Cashback Credit Cards?
In simple terms, cashback credit cards reward you by giving back a small percentage of what you spend. Think of it as a bonus for each swipe! Typically, these cards offer a flat rate on all purchases, though many go a step further, offering extra cashback in popular spending categories like groceries or online shopping. Once you’ve earned enough cashback, you can redeem it as a statement credit, bank deposit, or even a gift card.
As Prashant Kumar, Founder and CEO of Kredit.Pe, explains, “Cashback credit cards reward cardholders by returning a percentage of their spending as cash. Some cards offer higher rewards for specific categories like online shopping.” For example, if your card gives 2% cashback on groceries and you spend INR 5,000 on a weekly shopping trip, you’ll see INR 100 back on your statement.
Types of Cashback Credit Cards
Not all cashback cards are the same; there are a few variations designed to suit different spending styles:
1. Flat-rate cashback cards: These cards offer a fixed rate on all purchases, say 1.5% on every transaction, whether you’re buying lunch or booking flights.
2. Tiered cashback cards: These cards reward different categories at different rates. For instance, you might get 3% on dining, 2% on groceries, and 1% on everything else.
3. Choose-your-own-category cards: These offer flexibility by letting you select your bonus categories each month from a list, making them ideal if your spending changes seasonally.
Popular Cashback Categories
Some of the most common categories for enhanced cashback include:
Groceries and department stores: Essentials are always a big budget item, so why not get a little back?
Online shopping: Platforms like Amazon and Flipkart often qualify for bonus rates.
Fuel: Getting cashback on fuel purchases is helpful if you’re a frequent driver.
Dining and food delivery: For those who love to dine out or order in, some cards offer extra rewards.
Utility bills: Many cards offer cashback on utility bill payments, which can add up over time.
Some cards even come with special bonuses or higher cashback rates if you meet certain spending thresholds each month, giving you a little extra incentive. However, Kumar also notes that specialized cards, such as those focused on travel or UPI transactions, can offer better rewards in specific areas.
Tips for Making the Most of Your Cashback Card
Here’s how to maximize your benefits with a cashback credit card:
Match the card to your spending: Choose a card that aligns with where you spend the most, like groceries or travel.
Keep an eye on category bonuses: Know which categories are offering higher rates and adjust your purchases accordingly.
Take advantage of special promotions: Some cards offer seasonal cashback boosts or limited-time offers.
Always pay off your balance: Cashback isn’t worth much if you’re paying high interest, so aim to clear your balance in full each month.
Redeem regularly: Many people forget about their cashback or let it sit. Redeem it regularly so it can offset your future bills!
Watch Out for the Drawbacks
Cashback cards do come with a few potential downsides. Many charge annual fees, so you’ll want to ensure your earnings will cover this cost. Some also have spending caps on cashback or require you to reach a minimum before redeeming. And, while the prospect of “free” money can be tempting, it’s wise to avoid overspending just to earn more cashback—this can quickly lead to unnecessary debt.
In summary, cashback credit cards can be a fantastic tool for earning a bit back on everyday purchases. Just remember to match your card to your lifestyle, keep track of bonus categories, and pay off your balance to make the most of your cashback.
