What Is Rewards Points, How It Is Different From Cash Back, Available Rewards Points In Market

Reward points are non-cash incentives offered by a loyalty program to its customers, for encouraging them to spend more on selected goods and services of businesses associated with the program. These points are usually calculated in multiples of 1, where one reward point equals a pre-determined number in actual currency value. Reward points are often presented to customers as a coalition of a large number of retailers, where customers of the respective business are rewarded for using their credit or debit cards for transactions, instead of cash.

In addition to pure points, some programs offer incentives like weekend travel packages, travel upgrades and outings at entertainment avenues, while many programs also offer bonus points as soon as a customer signs up. Every time a customer swipes his or her card to make a purchase, the credit card company automatically credits specified award points in the customer’s loyalty program account. If the credit card company ties up with specific retailers, customers get extra reward points when they spend with their credit card at the respective outlets.

Different banks have different ways by which their customers can redeem the earned reward points. From redeeming the reward points for cash, to converting them into air miles, to adjusting them in the next credit card bill; banks believe in devising innovative ways for increasing customer delight.

Unlike reward points, Cash Back is a more direct incentive for a bank’s customers for using their credit or debit cards. Upon every purchase at a specified retail outlet, the customers pays a reduced bill as per the applicable cash back percentage. For example, if the bank is running an offer of ‘5% cash back on billing of Rs.1000 & more’ – the cash back percentage will be calculated accordingly and the bill amount will be proportionately reduced. Thus, cash back can be defined as a form of incentive offered to buyers of certain products using a specific card, whereby they receive a specified cash discount on their bill.

Cash back is a way by which banks encourage their customers to use their credit card more often. Some credit card companies give their customers the option of converting their earned cash back into vouchers at selected online and offline stores. This works well with regular spenders who are looking for special offers and discounts, and do not mind replacing cash to pay for their purchase.

In India, many Indian and foreign banks run loyalty reward programs for offering their customers multiple opportunities of earning reward points, which can be redeemed in full or partial payment for buying products from selected merchant partners. Standalone loyalty program management companies also run their own branded loyalty reward programs for customers of businesses across diverse categories.

Apart from banks, loyalty reward programs are run by airlines, restaurant chains, multi-brand stores and malls. Each program is distinct from the other in terms of calculating reward points and devising schemes with different banks.

Successful international stand-alone card less loyalty rewards programs have also made their debut in India. These programs use the latest technology to make participation, rewards earning and redemption seamless for their customers. This is leading to a major customer shift from traditional card based reward programs to technology enables mobile app based reward programs. Coupon websites also run reward programs, which let the members save on their regular purchases of leading Indian and International brands across popular shopping websites.