13th January 2011, 15:29
| #46 |
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13th January 2011, 15:38
| #47 | |
| BANNED Join Date: Apr 2008 Location: Bangalore
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Infractions: 0/3 (13) | Re: Credit Card Points, what do you redeem them for There are no free lunches in this world my friend. or hadnt you realized this already?  Sorry for a slightly elaborate and long post but I thought I would share this rough "back-of-the-envelope" perspective with our friends here, some of whom may benefit from it. From a financial perspective, each point is more or less worth Rs 0.25, 0.3,0.4 and 0.5 in general. For the higher end cards like Gold and Platinum and Titanium etc from some of the banks, each point could be worth upto Rs 1/-. The card company / rewards company / catalogue company typically procures the branded/ un-branded gifts/ vouchers at a discounted rate from the manufacturer/brand. They show the MRP of that product and the Rewards catalogue special price which is usually less than the MRP - this means that they are parting with some amount of discount to the consumer from the total discount they receive from the manufacturer/brand. The consumer thus, perceives a certain value from the "good deal" accruing to him because of that discount. In the case of un branded merchandise, the price shown is based on "perceived value" of the product. Here's where a silent money making opportunity exists because the "perceived value" of even an "un-branded" product is considerably higher than what it cost to make. This is because, often, the perceived value of such product is more or less in line with or marginally less than the marketplace rate for a similar product from the "branded" segment. The cost of manufacturing the un-branded product would typically be slightly less than the cost of manufacturing a corresponding "branded" product on account of compliances and certifications and blah blah etc. Also the un-branded product would typically price itself a little lower than a branded one of the same type. This is done to woo away the "deal seeker" who is not interested in the "brand" per se. Anyway it is also typical that such un-branded product carries some suitable fancy sounding label on it - which adds to its appeal and raises its value when comparison is made to a well known brand, on product-to-product basis. Hence the opportunity to make more money exists in the un-branded product, because of the demand pull for such product being created or fuelled by the demand that already exists for a similar product which is branded. E.g: A Branded White Shirt may be priced at Rs 1250/-. A similar White Shirt from the un-branded segment/ private label, could be priced at Rs 1000/-. Now, in case, as per your credit card TIER/ type the value of the points is only say Rs 0.4/-per point, then the number of points you need to redeem to reach the MRP of this product is going to be around 2500 points. However, in case your point value is Rs 1/- then you will be redeeming exactly 1000 points for the said shirt. For example even for FUEL, if one redeems say 120-125 points, one only receives Rs 50/- worth of vouchers. Here in effect each of the points is worth Rs 0.4/-. At one time - in 2005-2006 the card companies used to redeem 50 points for 50 Rs worth of Fuel. Then it became 65 points for Rs 50 worth of Fuel. Now it is around 120-125 points for Rs 50 worth of Fuel. Remember, the valuation of the points is always notional - valuation could vary from product to product, depending on the cost price of the product at the reward company's end etc. With this equation in mind, every time note that when one spends Rs 100 on the card, one walks away with 1 or 2 or even 3 or 5 points added into the Card on account of spend. This is dependent on the Tier/ Level/Type of card. Taking the example of 3 points of Rs 0.4/- value each, earned per Rs 100 spent on the card, effectively one is getting a 1.2% discount. If one uses a card as a cash substitute and makes most of the standard day to day purchases on the card, one stands to gain quite a bit via this rewards programme. Paying cash doesnt earn one any points. Spending on the card does. But the trick is to pay all one's outstandings on time/ before due date. Also, lets remember that one is earning points by spending money which one would anyway have spent on things like perhapsgroceries, food, mobile phone bill etc. It is a win-win all around - consumer, retailer/franchisee, bank, manufacturer/brand - everyone in the chain gains! The consumer gains via the points that accrue to him. The retailer/franchisee gains by way of his margin from the sale of the product. Bank takes the commission/ service fee from the retailer. Manufacturer/brand gains from product sales. Remember, the bank gains from the merchant service fee levied on the retail outlet. It also gains in terms of more people spending more on their cards thereby keeping a large amount of "Loaned money" in circulation. Additionally it gains if the consumer pays only a part of his outstanding to the bank at the due date. It does NOT gain from "transactor" consumers - who use the card as a measure of convenience, often spending large amounts on it for travel, ticketing, high end purchases etc, but who pay the entire outstanding up promptly at the due date. But it still gains on the merchant service fees even in this case, on purchases made by these consumers as well because the retailer has to pay the service fee regardless of what type of consumer buys from it. The reward company gains from the discounts it is able to negotiate for bulk purchases made of any item in its catalogue. It also gains by way of a processing fee/ service fee/ arbitrage which it levies on the bank that it is acting on behalf of - this service fee is a minute percentage because a very large percentage of consumers who are earning points, do not redeem them. This is more or less the busines/revenue model and viewed from any perspective it is perfectly above board and fair. Of course, in return the reward chaps need to provide good quality products/merchandise which one "wants" - very often they dont provide good stuff and very often many of us may not want/like any of their gifts. This is why some of us find the best gift to be FUEL, which we anyway will use up while commuting or on holiday. This is only my submission and my opinion based on some amount of research. It does not purport to be an academic essay and it may or may not be representative of the actual facts on the ground and nor do I make any such claim as to this. Quote:
Last edited by shankar.balan : 13th January 2011 at 15:43. | |
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. Whats the logic behind these exorbitantly priced rewards? 
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13th January 2011, 15:42
| #48 |
| Senior - BHPian  | Re: Credit Card Points, what do you redeem them for I just redeemed my ICICI card point on IMint for Jaipuri Rajai (Because now it is winter season  ). Actually I never knew that I had this much point and it is automatically get transfer to Mint. I had accumulated around 8700 points on iMint card. Every month I used to see point on ICICI card statement and then it used to disappear next month. For many months I did not care. One day my friend was redeeming their Citibank card and they asked me what do you purchase with these points? I told them for me it disappears every month. Then he asked me to confirm from Customer Care. I was fuming and called Customer Care for the sake of blasting them. Then I came to know that it is actually being transferred to my iMint card. He gave my all my iMint reference number and then I was able to redeem it. |
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13th January 2011, 15:48
| #49 |
| Senior - BHPian  | |
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13th January 2011, 16:06
| #50 |
| Distinguished - BHPian | |
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13th January 2011, 17:02
| #51 | |
| BHPian Join Date: Apr 2009 Location: Seattle
Posts: 585
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| Re: Credit Card Points, what do you redeem them for Quote:
Yes, I also use the Jet Citi card. I pay an annual fee but I easily recover the fee paid against benefits. Lots of goodies with the card - upgrade/discount vouchers ,upgraded baggage allowance and free tickets (only pay like 700-800 Rs as tax on a Bangalore Delhi ticket). I remember seeing a mailer for another travel focused card that had 4 air miles/100 rs spent without being tied down to any particular airline. Can't remember details but it was from Deutsche Bank IIRC. Last edited by CrackedHead : 13th January 2011 at 17:04. | |
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13th January 2011, 22:56
| #52 |
| BHPian Join Date: Jul 2009 Location: Bangalore
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13th January 2011, 23:19
| #53 | |
| BHPian  Join Date: Jun 2007 Location: Bangalore
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| Re: Credit Card Points, what do you redeem them for Quote:
I use AMEX KingFisher Platinum Card - Simply awesome for the miles and benefits alone. I already got one free return trip anywhere in India! Weekend spends have 5 times the points as on weekdays (Mon-Thu) - There are platinum partners where you earn 10 times the regular points! Very happy with the service too. (Their website is a bit crappy) - I also get access to KF Lounge anywhere in India (read free food / coffee and a great place to rest) because of complementary Gold Class Membership of King Club. I am enjoying it - Do PM me know if you need any info. | |
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14th January 2011, 12:59
| #54 | ||
| Senior - BHPian  Join Date: May 2006 Location: Bangalore
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| Re: Credit Card Points, what do you redeem them for Quote:
Quote:
What is the annual membership fee btw? Last edited by Jaguar : 14th January 2011 at 13:03. | ||
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14th January 2011, 19:26
| #55 |
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15th January 2011, 10:42
| #56 |
| Senior - BHPian  Join Date: Oct 2006 Location: Mumbai - The city of Sea Link!!!
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8th February 2011, 20:52
| #57 | ||
| BHPian Join Date: Aug 2009 Location: Bangalore
Posts: 232
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| Re: Credit Card Points, what do you redeem them for Quote:
Are there any ways to recover the membership fee other than purchasing the air tickets? Quote:
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8th February 2011, 22:39
| #58 |
| Senior - BHPian  | Re: Credit Card Points, what do you redeem them for I have accumalated 5000 points on my HDFC World Bank Master Card. A quick glance on their website to check the redemption product/voucher list made me understand there was nothing that was exciting except for a Citizen Eco-Drive watch which can be bought exchange of points + some dough. Maybe, its time to get a new watch after all |
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9th February 2011, 16:47
| #59 | |
| Senior - BHPian | Re: Credit Card Points, what do you redeem them for Quote:
1. Rs.500 Voucher for exchance of 1430 Points for Citizen Eco-Drive watch. Which is like < Rs.2000 discount. 2. Rs.250 Voucher for Mainland China in exchange of 720 Points 3. Rs.500 Voucher from Dominos Pizza in exchange of 1430 Points Essentially, the benefit is Rs.1 for every 3 points at an average. | |
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9th February 2011, 17:34
| #60 | |
| Senior - BHPian  Join Date: Jul 2009 Location: Hyderabad
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| Re: Credit Card Points, what do you redeem them for Quote:
Infact this i-mint is a ICICI bank cards venture IMO. | |
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