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Credit Card - Reward Rate Comparison - What is listed vs Actual Reward Rate

financewizard

TF Premier
VIP Lounge
This is an awareness thread on Reward Points. I see many videos and articles where the finfluencers encourage people to buy Amazon vouchers via Gyftr for HDFC and Amex cards. Even banks, in a sort of way, misrepresent the actual reward rates, and people with cards like Regalia Gold, Amex MRCC fall into this trap. Even for HDFC Infinia, the actual returns are in the margin of 10–13% and not 16+% as claimed by the bank. The clever trick lies in how the reward rate is calculated that inflates the reward rate—especially factoring in the processing fee.

Assume that you are purchasing an Amazon GV worth 1000. The total cost in SmartBuy is going to be 1041.3. For Infinia, the total rewards will be 150—hence total value of purchase is 1000 + 150 = 1150. However, to get this 1150, you have spent 1041.3. Hence, the actual additional benefit because of the card is 108.7 (1150 - 1041.3). Hence, the absolute returns are 108.7 and this return is for the targeted spend (GV) of 1000. Thus, the reward rate is 10.87%. However, finfluencers and HDFC claim that the reward rate is 16.6% (14.41% in this case) by simply dividing the rewards earned by total value of purchase.

For Regalia Gold, the total rewards will be 60 Rs (assuming reward redemption rate of 0.50)—hence total value of purchase is 1000 + 60 = 1060. However, to get this 1060, you have spent 1041.3. Hence, the actual additional benefit because of the card is 18.7 (1060 - 1041.3). Hence, the absolute returns are 18.7 and this return is for the targeted spend (GV) of 1000. Thus, the reward rate is 1.87%. However, finfluencers and HDFC claim that the reward rate is 6.63% (5.76% in this case) by simply dividing the rewards earned by total value of purchase.

Similarly, with Amex MRCC, people claim that if purchased through Gyftr, the reward rate is 5.09% (including value of 1000 RP), whereas in reality it is 3.41% if purchased through Gyftr. Whereas it is 4.67% if directly purchased on Amazon.

If one is purchasing products directly from Amazon, maybe it is wiser to use the ICICI Amazon Card / SBI Cashback and get 5% CB. However, people opt to purchase GV from Gyftr via Regalia Gold or MRCC assuming that the reward rate is higher than 5%. But in reality, it is very low and often misrepresented. (The key assumption here is on the redemption value of the RPs. I have assumed them to be 1 for Infinia, 0.50 for Regalia Gold & 0.25 for MRCC - and all 3 are standard rates for redemption for Flight bookings or purchase of GVs).

Refer the attached spreadsheet for calculations.

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There are many points experts can explain but here is one from me:
People buy Apay gift voucher not just for amazon shopping but in many other places where direct credit card payment does not give reward (ex- fuel, utility, insurance etc.). Instead of having seperate cards for all these categories, 1 card that has good rewards on apay voucher can take care of all these.
Apay gift voucher can be used to buy other gift vouchers also and thats how poeple can do double dip.
 
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