Credit card reward points have become one of the most aggressively marketed financial perks in India, often showcased through stories of “free” flights, luxury hotel stays and high-value vouchers. For many urban consumers, rewards are no longer a bonus but the primary reason to choose a credit card. With card usage rising sharply and millions swiping daily, reward programmes have moved from the fringes to the centre of India’s consumer finance ecosystem. Yet beneath the glossy promise of freebies lies a more complex and uneven reality.

At the heart of credit card rewards is a cost structure that most users rarely notice. Banks fund these reward programmes largely through merchant discount rates (MDR) or interchange fees charged to retailers on every transaction. These fees are ultimately built into the prices consumers pay for goods and services. In simple terms, rewards are not free; they are subsidised by the broader market. Adding to the confusion is the valuation of reward points themselves. One point is almost never worth one rupee. Its real value depends entirely on how and where it is redeemed, with a wide gap between perceived savings and actual returns.

Travel redemptions typically offer the highest value per point, especially for flights and hotel stays booked strategically. In contrast, redemptions such as vouchers, cashback or merchandise often deliver significantly lower value. Despite this, many cardholders assume they are “saving” money simply by accumulating points, overlooking the fact that rewards only accrue after spending first. This mismatch between perception and reality fuels disappointment for casual users who expect outsized benefits with minimal effort.

The founder of a platform focused on optimising credit card rewards explained that headline-grabbing examples of free flights are the result of long-term, disciplined usage. His own experience of earning multiple complimentary flights spans over a decade and involves careful card selection, strategic spending in high-reward categories and precise timing of redemptions. According to him, some cards can still yield a free domestic flight for annual spending of around Rs 60,000 to Rs 70,000, but only for frequent travellers who extract maximum value. For occasional flyers, such cards often fail to justify their fees or complexity.

He stressed that financial discipline is non-negotiable. Credit cards, he argued, are not designed for impulsive or poorly planned spending. Chasing rewards should never become a reason to spend more than necessary. True optimisation demands time, attention and ongoing learning, as card benefits, rules and redemption structures change frequently. For many users, convenience eventually overrides optimisation, diluting the value of rewards. As a result, the system disproportionately benefits high spenders, online shoppers, frequent travellers and holders of premium cards, while low-volume users see limited gains.

A veteran credit card industry professional offered a broader perspective on adoption trends. Despite rapid growth, credit cards remain far less common than debit cards or UPI-based payments. RBI data shows roughly 10–11 crore credit card holders compared to over 100 crore debit cards. The reason, he said, is structural. Debit cards use the customer’s own money, whereas credit cards represent unsecured loans from banks, making them riskier and less accessible. However, for the roughly 80% of users who pay their bills on time, credit cards can be beneficial if spending remains well within income limits, ideally not exceeding one-third of monthly earnings.

From a bank’s perspective, profits do not come primarily from disciplined users. Revenue is driven by revolvers who carry balances and pay steep interest rates ranging from 24% to 48% annually, as well as from cash withdrawals and merchant fees. Customers who pay in full and maximise rewards often cost banks money in reward payouts. Banks offset this by cross-selling high-margin products such as premium accounts, insurance and wealth services, particularly to affluent customers.

The growing influence of social media has added another layer of distortion. Many consumers choose cards based on influencer promotions or recommendations from friends and family, often ending up with products poorly matched to their spending habits. True reward optimisation involves a full lifecycle approach—choosing the right card, using it correctly, redeeming points intelligently and managing associated loyalty programmes, where point values can range from a few paise to several rupees depending on usage.

In the final analysis, credit card rewards are neither a scam nor a guaranteed win. They are a sophisticated system that rewards knowledge, effort and discipline. For frequent travellers and high spenders, rewards can meaningfully enhance value. For others, the benefits may be marginal or illusory. The golden rule remains unchanged: spend only what you need, pay on time and choose wisely. Rewards should complement sound financial habits, not replace them.