22 NOVEMBER, 2021

Credit cards have become a convenient method of paying for goods and services. A credit card can help you improve your credit score if your spending is kept in check and you pay the total amount by the due date. You can also enjoy great discounts, cashbacks, and rewards that are often offered.

If you are a beginner with using credit cards or an experienced hand, aiming to make things easier with cashback or even how to earn cashback can be irresistible. Compared to other rewards schemes, though, cashback is quite straightforward. Eventually, the best money-back credit card is the one you will be able to use regularly, and that rewards you for the kind of expenditure you do the most. Therefore, it is recommended that you understand your reason for choosing a card. This will help you in your decision-making process for knowing the best one.

Here’s all you need to understand about selecting a cashback credit card and some tips to get your hunt started.

What is a cashback Credit Card?

The cashback credit card, also referred to as a money-back credit card has taken over the market today. Who doesn’t want to spend money and get some cashback in the transaction? Of course, if you collect enough reward points, the rewards claim procedure will be the next step for all that you need. But if it reaches you as money that you can use for just about anything, then that might be the best credit card for you.

A cashback credit card is a reward-based credit card that gives back a certain percentage of every qualified purchase you make. So, for example, spending INR 1000 on a card with a 1% cashback rate would give you back INR 10. It may not sound overwhelming, but such rewards can speedily add up over time.

How do money-back credit cards work?

When you use a Money-Back Card, you earn a cash reward in-lieu of air miles or reward points. Depending on the bank that issues your money-back credit card, you can earn cashback anywhere between 1% and 5% of your qualified spending. It further depends on the type of credit card that you use and where you use the card.

What are the three kinds of cashback credit cards?

There are three kinds of cashback credit card in the market:

  • Flat-rate cashback credit card
  • Tiered cashback credit card
  • Bonus cashback credit card


Flat-rate cashback credit card

As the name indicates, this type of credit card pays the uniform cash percentage on every transaction, regardless of the category of spending. Therefore, such a credit card type is ideal for people whose expense is not limited to any specific category but spread across all or most shopping categories. In addition, this type of card has a flat reward percentage rate on every purchase you make.

Once you decide on the card, you can apply online for it, and that is very simple. Submit an online credit card form, along with necessary documents, and get quick approvals.

Tiered Cashback Credit Card

This cashback credit card differs from a Flat-rate cashback credit card. This cashback credit card provides different cashback rates. There is a regular cashback rate on a certain kind of purchase, and they offer “Accelerated Rewards” on certain other types. Accelerated rewards cards are the points or cash or miles that you earn above the usual reward rate. Generally, accelerated rewards categories include groceries, fuel, dining, entertainment, and travel.

For example, this kind of Tiered cashback Credit Card may offer 2% on gas, 3% on groceries, 5% on entertainment, and a straight 1% on everything else.

So this essentially infers that you get cashback for different categories at different rates. It is the best credit card for those who spend more in specific categories. For example, let’s say you go out to eat a lot. Or spend more on fuel for your vehicle. Or you have a large/joint family and spend more on daily needs/groceries. In such cases, it makes a lot of sense to apply for a card that gives you accelerated rewards on these respective categories. The strategy to get the most out of a Tiered cashback credit card is by identifying the shopping categories that can get you accelerated rewards and spending on such categories to get the required benefit.

Similar to flat-rate cashback credit cards, here as well submit an online credit card form, along with necessary documents, and get quick approvals.

Bonus Cash Rewards Cards

A Bonus cashback credit card provides better cashback rates for specific shopping categories during specified periods. It keeps varying periodically– say every month or quarter or so. And it pays a uniform cashback rate on every other spend. To get the most out of a card, you need to be attentive to any literature, email, or any other promotional material that your bank might send you with the details where it tells you when the changes happen and what are these changes?


No credit card is better than all the others in all categories or for everyone. But by comprehending your options and seeking the right questions, you can find the card that's best for your spending habits and your credit situation. Now that you know the three types of cashback credit cards, which get you more cashback rewards as you spend more on specific categories.

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Disclaimer: This Article is for information purposes only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. The Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Article. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from the Bank. The Bank, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein. Tax laws are subject to amendment from time to time. The above information is for general understanding and reference. This is not legal advice or tax advice, and users are advised to consult their tax advisors before making any decision or taking any action.