Festival offers on credit cards: What you should know

If you have a credit card, it is time to cash in. But remember to do it with your eyes wide open. Do not purchase something with a credit card just because it has a cash back offer. No cash back offer can justify an inessential purchase. Also, do not forget to read the fine print before you go on a swiping spree and read the "Conditions Apply" part well. These will be in the smallest legally allowed font size on the offer. Therefore, all things considered, here is what you should know to get the full advantage of cash back offers.

There's a minimum requirement

You might have to spend a minimum amount per charge as well as a minimum charge per month to avail of the cash back offer. Normally the minimum amount per charge could be as high as Rs 2000 plus and the minimum charge per month could be as high as Rs 10,000 plus. The danger here is that you may end up buying stuff you don't need just to make it to that minimum amount. In certain cases, you may also need to make a minimum number of transactions with the card before you can avail of the offer.

And a maximum you can get

Though the cash-back percentage may be high (say 10%) the maximum amount you may get as cash back may be a mere drop in the ocean when compared to the bill amount. For example, in one specific offer last year, the maximum cash back was Rs 500/- per month even though the cash back percentage was 10%. Thus if you ended up purchasing for about Rs 50,000 driven by the 10% cash back your cash back would be restricted to Rs 500/- only (making the effective cash back at 1% instead of the advertised 10%).

Cash back may depend on what you buy

The cash back offer may be valid only for certain kind of purchases. For instance, one specific credit offered a cash-back only on apparel, consumer durables, jewellery, watches, electronic goods and leather items, and purchases made at department stores. So before you plan to pay for that expensive dinner with your card, find out whether or not it is eligible for that cash back offer.

Is the vendor using the right machine?

The cash back offer may be applicable only if the card is swiped on the machine owned by the card issuing bank. Swipe it on a different machine and you won't get cash back. So make sure the vendor swipes your card on the right machine.

Getting the code right
In some cases, the amount of cash back you'll be eligible for may depend on the six-digit authorization approval code (AAC) number on your payment slip. For example, in the case of an ICICI Bank credit card, the sum of these digits can range from 1 (when the AAC is 000001) to a maximum of 54 (when the AAC is 999999). If this sum ranges between 0 and 5, the amount repaid by the bank will be 75%; if it is 51 and above, the cash back will be 100% of the value of the purchases. Obviously the odds of the sum of all the AAC digits falling within the range that offers high cash backs are not high.

Lastly the bank reserves the right to deny the cash back if you are in default on the credit card account. So remember to pay your credit card bills on time.

Cash back programs do offer a lot of advantages. All you have to do is examine the terms and conditions well and buy stuff that you actually need. So go and swipe that card, happy shopping!