Young Investor

Shopping and reward points system

BL RESEARCH BUREAU | Updated on February 15, 2012 Published on December 31, 2011

While you were frenetically shopping for those party clothes and gifts this holiday season, were you confronted with a pitch to sell you that store's membership card? Or were you tempted by an ad for a credit card promising great rewards on shopping? Either way, if you buy loyalty or credit cards thinking that the reward points from them is a good method to cut down those shopping bills this coming year, think again.

The credit card and store loyalty card reward system gives out a certain number of points based on spending. It requires a racking up of a minimum number of points in order to redeem them for gifts or discounts.

Bestowing all importance on the rewards system makes sense only if you're an extremely avid shopper, and as far as loyalty cards go, a very brand-conscious shopper as well.

Here's explaining how the reward systems work.

Rewarding spending

Individual store chains, such as Landmark, Pantaloon, Shoppers Stop, Reliance Fresh, and so on have loyalty cards specific to their store chain. You can use these at any of the chain's stores.

There are two ways to get a card. Make a minimum purchase in the store – Rs 2,000 at Westside, for instance – and get a card by virtue of that spend. Or, buy a membership card outright - Shoppers Stop's First Citizen card can be bought for Rs 200.

Purchases you make at any of the chain's stores will be translated into reward points based on the store membership policy. Once you cross a minimum threshold of points, you can redeem them for discounts or gift vouchers. It's this threshold and the proportion of their conversion into discounts that determines how beneficial membership might be.

Lifestyle's The Inner Circle rewards every Rs 100 with 2 points. You need to rack up 143 points to begin redemption, or Rs 7,150. Every 143 points earns a gift voucher of Rs 100. The resultant discount earned on your spending is therefore just over 1 per cent. Similarly, Westside's Club West needs a minimum of 200 points accumulated for a discount of Rs 200, calling for a minimum outgo of Rs 20,000.

The system is similar in credit cards as well. Kotak Mahindra's Urbane Gold Card, for example, gives out three reward points for every Rs 100 spent. You need a minimum of 1,000 points to begin to claim redemption, translating into an outgo of at least Rs 33,333 on your part.

Other considerations

Reward points, therefore, don't really make a sizeable difference to your shopping bill. Points accumulated also expire after a particular period, whether with credit cards or store cards.

Look at other costs and benefits besides rewards, more so with credit cards. There a variety of factors which carry far more weight than reward points such as interest rates, cash withdrawal, availability of add-on cards, annual fees and so on.

With store cards, there are other benefits; some loyalty programs such as Pantaloon's Green Card, for instance, offer exclusive shopping days for discounts and new product lines, billing counters, extended exchange periods and so on.



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