Waiting to collect enough reward points from your spending to get that fancy watch? Well, your savings bank account could help you there as some banks offer points on transactions in your savings account. Here’s more.
Working online
Through their rewards system, banks encourage you to make as many online transactions as possible through your savings account, which in turn benefits them. Recently, ICICI Bank announced such a move, offering points for using your savings bank account for a wide variety of purposes.
While banks such as Standard Chartered and Citibank also have similar schemes, ICICI Bank’s programme is more extensive. Points so accumulated can be redeemed for various products or vouchers, as with credit card points. Standard Chartered also allows you to convert points thus earned to cash on select types of savings bank accounts.
ICICI Bank’s move comes especially in light of banks’ freedom to set interest rates on bank accounts. A higher interest rate offered by other banks – such as YES Bank and Kotak Mahindra Bank – could result in you taking your savings account there.
So what are the transactions you can hope to earn points on? First, any online transaction such as shopping with net banking or mobile banking. Second, any standing instruction you give your bank such as for recurring deposits or loan payments. Third, any bill payments, for example, your mobile, direct-to-home, telephone bill, and so on.
Now, these are transactions on which you can earn recurring points. If you’re a newbie, you stand to earn a one-time lump of points after you set up mobile banking, internet banking or a demat account and so on.
Each type of transaction earns a certain number of points. Let’s say in October, you paid a landline and mobile bill and a digital TV connection recharge through net banking. Then you spend Rs 800 on books, music and movie tickets, all bought online. You also buy various other little things worth Rs 500 through your mobile. According to ICICI Bank’s reward points system, each bill paid nets 10 points. So for three bills, you earn 30 points. Each online spend – or through mobile – earns a point for every Rs 100. Since you have spent Rs 1,300, you earn 13 points. In all, you have a haul of 43 points.
Then, let’s say now you set up an ICICI Bank Recurring Deposit with auto-debit. This gives 10 points per successful debit. So you’ve notched up a total of 53 points now. For auto-debits on home or vehicle loans – from ICICI Bank alone – disbursed after September 2012, with auto-debit, each lakh of loan will give 10 points. Citibank has a ‘Suvidha Loyalty’ scheme along the same lines, as do others such as Standard Chartered.
However, there are a few conditions. You need to maintain a minimum average balance. Bills paid should also be at least Rs 200 to qualify. Online tax payments and so on do not fall into the reward points category. Also note that paying credit card dues on the same bank’s cards will not earn points.
Is it for you?
The reward points system is not lucrative enough to entice you into signing up. If you already hold an account with the bank, it at best adds zing to your credit/debit points. The only plus point about such a programme is that points begot are all added up and therefore points may accumulate quicker.
For instance, if you shift mode of paying bills to net banking, each bill paid gets points. Taking ICICI Bank’s example, you will have to otherwise spend Rs 1,000 on a credit/ debit card to get ten points instead of a single bill of Rs 200. Else, reward points do not add much.
But say you shop online. At the most, it simply implies a change in mode of payment from credit/debit card to net banking. The points earned through net banking will be balanced out by the points lost on your credit card. Further, if you’re already wary of transacting online, then the rewards system is not a big enough draw to pull you into the virtual world.
Also look at the gifts which can be bought with the points. Continuing with the ICICI Bank example, the minimum points to redeem for a gift is 200 – for a Surat Diamonds gift voucher worth Rs 50.On select accounts, Standard Chartered allows conversion of points into cash too.