Reward Points vs Cashback Cards: Why Rewards Never Beat Interest

Reward points and cashback both give you something back when you spend on a credit card, but neither one makes up for interest. Card issuers' published revolving rates are about 3.5% to 4% a month, which is about 42% to 48% a year, plus 18% GST on the interest (card issuers' published terms, checked 28 October 2026). In our worked example below, a ₹50,000 balance carried for a month costs ₹2,213 in interest and GST. So the first rule of any rewards card is simple: rewards only pay off when you clear the full bill by the due date.

This guide explains how reward points and cashback differ, what to check in your card's terms, and what carrying a balance does to the value of your rewards. If you already carry a balance, see our guide on how to clear credit card debt in India.

All figures below are illustrations for a hypothetical cardholder, not offers or quotes from any card issuer or lender. CredLinq is not a lender.

What is the difference between reward points and cashback?

Cashback gives you back money, usually as a credit on your card statement or account. You can see what you got, and its value doesn't depend on how you redeem it.

Reward points are units your card issuer credits when you spend. What a point is worth depends on what you redeem it for, such as vouchers, products, travel or a statement credit, and on the value the issuer sets for each option. Points can also have expiry dates, minimum redemption levels and redemption fees.

Both are part of what RBI calls a card loyalty or reward programme. RBI's credit card rules say any discounts, cashbacks, reward points or other benefits must be provided in a transparent manner, including their source. Details must be shown on the card issuer's website, and a copy given to the cardholder (RBI credit card Directions, 2025, para 72). The rules don't set how much a card must give back. That is in your card's terms.

Which is better for you: reward points or cashback?

It depends on how you spend and how you redeem, so check these in your own card's terms and on the issuer's website:

• What you actually get back. For cashback, the percentage, any monthly cap and which spends are excluded. For points, how many points you earn per spend and what one point is worth for the redemption you would really use.
• Expiry and redemption rules. Points you never redeem are worth nothing. Look for expiry dates, minimum redemption levels and any redemption fee.
• Exclusions. Some categories of spending may earn less or nothing.
• The annual fee. If the fee, plus any applicable GST, is more than the rewards you would realistically earn in a year, the card costs you money even when you pay in full.
• Your habits. If you rarely redeem, simple cashback is usually easier to get value from. If you redeem carefully, points can work for you.

None of this matters if you carry a balance, as the worked example shows.

Can rewards make up for credit card interest?

Worked example (illustration only). Say you carry a ₹50,000 balance at 3.75% a month, an example rate within card issuers' published range, plus 18% GST on the interest.

• Interest for one month: ₹1,875
• GST on that interest: ₹338
• Cost of carrying ₹50,000 for one month: ₹2,213
• If the balance stays at ₹50,000 for a year: about ₹26,550 in interest and GST

For rewards to cover ₹2,213 a month, they would need to be worth this share of everything you spend on the card:

Compare those figures with the reward rate in your own card's terms. Or put it in rupees: if your rewards were worth ₹500 a month (an assumed figure for this example, not any card's rate), carrying the ₹50,000 balance would still leave you ₹1,713 worse off every month.

What happens to your rewards if you carry a balance?

Three things work against you:

1. You lose the interest-free period. If you don't pay the total amount due by the due date, the interest-free period is lost, and interest can be charged from the date of each transaction, on the amount still outstanding (RBI credit card Directions, 2025, paras 23(3) and 23(6)). That includes new purchases. In our example, a ₹20,000 purchase carried for a month at 3.75% costs ₹750 in interest plus ₹135 GST, ₹885 in all, before counting any reward it earned.
2. Converting to EMI can cost you the points. In card issuers' published terms, the reward points earned on a purchase are often reversed when you convert it to EMI. Card EMIs also charge interest, with 18% GST on that interest, and often a processing fee, plus any applicable GST.
3. Spending for rewards adds to the balance. Every extra purchase made to earn points is more money that collects interest if you can't clear it.

How do you get the most from a rewards card without paying interest?

• Pay the total amount due every month, not just the minimum. Setting up an automatic payment for the full amount helps.
• Don't spend more to earn rewards. A reward is only a small share of what you spend.
• Redeem before points expire, and use the redemption that gives you the most value for things you would buy anyway.
• Check the annual fee against what you earn.
• Read the card's terms, including the most important terms and conditions, before you rely on a reward feature.

What should you do if you already carry a balance?

Put clearing the balance ahead of earning rewards.

1. Stop new spending on the card until the balance is cleared.
2. Pay a fixed amount above the minimum. In our example, paying ₹5,000 a month with no new spending clears ₹50,000 in 14 months and costs ₹17,499 in interest and GST. Paying ₹10,000 a month clears it in 6 months and costs ₹7,791.
3. Compare cheaper ways to repay. Card EMI conversion, a balance transfer to another card, or a personal loan can cost less than the revolving rate, but each has its own fees. Lenders' published personal-loan rates run from about 9% to 33% a year, with processing fees from 0% to 5% of the loan, plus any applicable GST (lenders' published pages, checked 29 October 2026), and the lender decides whether to approve you and at what rate. Our EMI savings calculator shows what one EMI could cost against your current card payments.

Be wary of anyone who offers to "settle" or "reduce" your card debt for a fee, and never share an OTP with anyone. If you have a complaint, complain to the card issuer first. If you get no reply within 30 days, or you aren't satisfied with the reply, you can take it to the RBI Ombudsman, free of charge, through RBI's Complaint Management System, if your issuer is covered by the Scheme. Not every NBFC is (RBI Integrated Ombudsman FAQs).

Carrying a card balance you want to clear? If you'd like help understanding your options, you can send CredLinq an enquiry. CredLinq is free for you. We never charge borrowers. Not a lender. We don't set rates or approve loans, and we can't promise a lower rate or an approval.

How we research this

We read RBI's rules and card issuers' published terms, then work every example with a script so the arithmetic can be checked. We don't name card issuers or lenders, and we don't state reward rates, because they vary by card and change often. Sources:

1. Reserve Bank of India, Reserve Bank of India (Commercial Banks – Credit Cards and Debit Cards: Issuance and Conduct) Directions, 2025, RBI/DOR/2025-26/155, 28 Nov 2025, paras 5(7), 23(3), 23(6) and 72. NBFC card issuers follow the NBFC version. https://www.rbi.org.in/scripts/BS_ViewMasDirections.aspx?id=13155 (accessed 2026-10-29); NBFC version: https://www.rbi.org.in/Scripts/BS_ViewMasDirections.aspx?id=12956 (accessed 2026-10-29)
2. CBIC, Notification No. 12/2017-Central Tax (Rate), Sl. 27, and Notification No. 11/2017-Central Tax (Rate) (as amended), heading 9971(v). https://cbic-gst.gov.in/hindi/pdf/central-tax-rate/Notification12-CGST.pdf and https://cbic-gst.gov.in/hindi/pdf/central-tax-rate/Notification11-CGST.pdf (accessed 2026-10-24); and Notification No. 15/2025-Central Tax (Rate), Gazette of India, 17 Sep 2025. https://egazette.gov.in/WriteReadData/2025/266220.pdf (accessed 2026-10-24)
3. Reserve Bank of India, FAQs – Reserve Bank – Integrated Ombudsman Scheme, 2026 (updated as on 1 Jul 2026), Q3, Q13 and Q17. https://www.rbi.org.in/commonperson/english/scripts/FAQs.aspx?Id=3407 (accessed 2026-10-26)
4. CredLinq Market Research: card issuers' published terms (checked 2026-10-24; revolving rates re-checked 2026-10-28) and lenders' published rate pages (checked 2026-10-29). Ranges only; issuers and lenders not named.

Last reviewed: 1 November 2026