Choosing the Best Credit Card for Online Shopping

With 2022 in its final weeks, many of us would be looking to indulge in some online shopping to end the year on a high. With credit cards these days offering great deals, discounts, cash back and rewards points on online spending, customers are spoiled for choice. However, choosing the best credit card for online shopping is based on personal priorities, given the different features and costs involved. We looked at different credit cards from the biggest issuers such as HDFC Bank, SBI Card, ICICI Bank and Axis Bank. Here’s a guide to getting the best credit card for online purchases.

On target with reward points

Reward Points (RP) are points or credits accrued in your name for a specific frequency or volume of transactions made through the credit card. Regular online shoppers can build a lot of PR. Once you’ve earned RP, it’s important to redeem them, otherwise they could expire within one to two years.

The RP system is mentioned in the characteristics of the card. For example, HDFC Bank Moneyback credit card gives two RP for every ₹150 spent and 2x RP for online purchases. In this case, RP is redeemed for credit card dues, exclusive gifts, or airline miles. Note that the RP redeemed against the statement balance occurs at a certain ratio; for example 1 RP = ₹0.20/0.30/0.5/1.

For SimplyCLICK SBI card, one can earn 10X rewards on online spending with exclusive partners and 5X rewards on all other online spending (excluding utility bill payments). But there may be a cap on RP per month. For example, a cap of 10,000 RP per calendar month on accumulating 10X RP is applicable on Amazon, after which every ₹100 spent there will accumulate 1 RP. There are limits for 5X RP for online spend outside of exclusive partner brands. Note that special RPs are often not applicable when there is a site-wide co-offer program.

If you go for a credit card because it gives good RP, keep the following in mind. First, redemption for travel benefits such as flight and hotel bookings via RP is allowed in some cards, but you can redeem up to a maximum of 50% of the booking value via RP. Second, if you choose to redeem points on the card issuer’s rewards portal, the value of 1 RP may be higher, but rewards redemption fees apply. Luckily, reward redemption fees are not charged when redeeming RP for cash back. Third, in some cards, no reward points are earned for gold and EMI purchases. This is a setback for many.

In advance on cashbacks

Cashback credit cards give you the opportunity to earn money as you spend. This is done by reimbursing you a percentage of what you spend. EMI transactions do not give cashback. Depending on the card, cashbacks are only activated above a certain transaction limit.

Typically, co-branded cards, where an e-commerce platform partners with a card company, offer great features. For example, the ICICI Bank Amazon Pay credit card allows you to earn 5% cashback on your Amazon India spending (3% if you are not a Prime member). Plus, using the card on Amazon Pay will earn you 2% cash back on payments to partner merchants. Earn 1% cashback on other expenses such as shopping, meals, insurance payments, travel expenses, etc. Note that there is an automatic conversion of earnings to Amazon Pay balance at the end of each billing cycle.

In comparison, the Flipkart Axis Bank Credit Card offers 5% cashback on Flipkart and Myntra, 4% cashback on Preferred Merchants, and 1.5% on all other categories. Gift card purchases will not earn you cash back, nor will wallet load transactions. The good thing is that there is no limit to credit card cashback earnings

Cashbacks are often rounded up for each individual transaction. For example, if for a transaction of ₹1,100, the customer is eligible for 1.5% cashback – ₹16.5 – only ₹16 will be credited.

Some cards apparently offer good cashback, but have monthly caps. For example, HDFC Bank Millenia Credit Card offers 5% cash back at 10 online merchants viz. Amazon, BookMyShow, Cult.fit, Flipkart, Myntra, Sony LIV, Swiggy, Tata CLiQ, Uber and Zomato. However, the maximum cashback per cycle is ₹1,000. Interestingly, this card allows you to exchange cashBack for assets. Check if the card of your choice allows this flexibility.

Welcome bonus, card fees

Many cards marketed as the best for online purchases sweeten the deal for customers with the allure of the welcome/renewal benefit. You need to understand how “profit” works. For example, Axis Bank Flipkart Card promises a welcome benefit of ₹1,100 divided into Flipkart vouchers worth ₹500 (for the first card transaction), 15% cash back up to ₹500 (on the first transaction) on Myntra using the card and 50% instant discount up to ₹100 on 1st Swiggy order using a code. Some cards such as HDFC Bank Millennia offer a welcome benefit of 1,000 withdrawal points if membership fees are paid. Note that there will be no vending machines for payment of renewal membership fees.

Card fees are important if you are sensitive to membership/renewal fees. The annual fee for HDFC Millennia and HDFC Bank Moneyback is ₹1,000 and ₹500 respectively. There are annual fee waiver conditions for the 1st year or the following year, which have either annual/quarterly/monthly spending targets. There are no membership fees or annual fees on the ICICI Bank Amazon Pay credit card. The Flipkart Axis Bank Card has a membership fee of ₹500 and an annual fee (from 2nd year onwards) of ₹500, but the annual fee is waived for annual expenses above ₹2 lakh. In the case of the SimplyCLICK SBI card, if you spend ₹1 lakh, you get an annual fee of ₹499 waived the following year.

Our point of view

Given the propensity for online shopping on Amazon, the ICICI Bank Amazon Pay credit card packs the most punch and value. For those who swear by Flipkart, the Axis Bank card is a good card. The SimplyCLICK SBI Card is a solid alternative for those who want the choice to shop online on more than one platform. Don’t be enticed by features like free airport lounge access if your primary focus is online shopping.

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