Credit Card Reward Points and Cash-Backs or a 6-Figure Liability: What I Chose and Why?

by Vinaya HS on March 16, 2011

in Finance

Thanks for visiting Capital Advisor. I frequently update this blog to cover various topics on personal finance such as investment strategies, financial products that you should buy and ones that you really should stay away from, financial calculators, emerging themes such as early retirement and financial independence, and much more. You can Subscribe through Email and receive new articles directly in your Inbox or you can Subscribe through the RSS Feed and receive new articles in your feed reader.

Recently, D and I made two major purchases for our home. On both occasions, we paid for the respective purchases in cash. On both occasions, however, I could have made the choice to use my credit card.

On the first purchase, I would have earned 250 reward points.

On the second purchase, I would have earned 380 reward points.

On the first purchase, I would have also earned Rs 400 in cash-back (the store had a cash-back scheme if you used XXXX Bank’s credit card and I happen to have one).

But, on both occasions, I chose not to.

For me, 630 reward points and Rs 400 in cash-back aren’t worth carrying a 6-figure liability (the credit limit set on my credit card) in my wallet each day. Sure, I could have slipped the credit card into my wallet on the day of purchase, but I’d also have to remember to take out the credit card upon returning home. Now, how many among us actually look inside our wallets each morning? You wake up and you rush to work. Taking out the credit card from you wallet is the least of your worries each morning.

And yes, you could argue in favor of the Card Protection Plan. But why would you ever want to pay someone each year just so that you can have peace of mind when you’re spending money that’s not even yours to begin with? To me, that’s the wrong peace of mind. Credit Card. Credit Card Protection. What next?

In my opinion, a credit card in your wallet is akin to a time-bomb waiting to diffuse. Plus with lost-card liability policies generally being in favor of the card issuer, your problems only compound. It’s not that I abhor credit card usage. I do use my credit card — but only when there are absolutely no other means to pay for that transaction. Even then, I first ensure that there’s cash in my savings account to settle the bill — in full.

What do you think?

Thanks for reading this article. I'd love to hear your opinion. Please use the comments section below to share your thoughts. I frequently write new articles that also cover several other aspects of personal finance including credit cards, financial goals, health insurance, income tax, life insurance, mutual funds, retirement planning, and much more. You can Subscribe through Email and receive new articles directly in your Inbox or you can Subscribe through the RSS Feed and receive new articles in your feed reader.

{ 19 comments… read them below or add one }

Ketan March 16, 2011 at 8:13 PM

You could have best of both. I sometimes keep a separate wallet (not my regular wallet) for credit card for specific purchases. I take both wallets and once home after purchasing through card, I have to keep that wallet away since that is not my regular wallet. Also since in your case you already have the cash money, you could have immediately paid back the credit card dues (equal to purchase value) through internet. This way:

1) You earn those reward points/cash back
2) You have a record of your purchase through online card statement (in case required in future and if bill etc is lost)
3) You do not have any debt since you already paid the card without waiting for bill cycle
4) You do not use it another time since you did not keep the card in your regular wallet

You have win-win all the way.


Rohan Kaikini March 17, 2011 at 11:49 AM

Completely agree with Ketan.. In fact, I came to your website from GReader only to comment the same thing!
If remembering to take out the credit card from your wallet after returning home is worth Rs.400, i think its a good deal..

Vinaya H S March 17, 2011 at 12:04 PM


A separate wallet for your credit card is a pretty nifty idea. :-)

But the Bank from whom I have my credit card doesn’t have an online payment option — they do, only if you have a linked savings account (and I’m strongly against having both at the same Bank). Plus, my savings account that once had an “Account to Card” transfer facility no longer offers this facility. So, I’m stuck with the archaic method of paying through check.


I completely understand your perspective. Probably my risk tolerance is very low!

Ashutosh March 17, 2011 at 12:48 PM

Like Rohan, even I got tempted to land here from Google Reader to comment :)

My Credit Card and Savings A/C are in different banks. What I have been doing as a practice for the last 6 years is –

- Got a lifetime free Credit Card
- Use the Credit Card to make all the payments
- Track all payments
- Clear full outstanding the day salary is credited without even waiting for the statement

This way I have been able to get a good credit history which was helpful when I applied for my home loan. Another, and a much better alternative is a charge card. But they are just a recent introduction in the Indian market, lets see how do they fare.


Vinaya H S March 17, 2011 at 12:55 PM


American Express has been bugging me to take their Charge Card. Seems it’s free in Year 1 but costs Rs 4,500 (annual charges) from Year 2. Seems they set an initial spending limit based on your salary and once you breach the limit they hike the spending limit up to the next level. Didn’t make any sense to me…

Shankar March 17, 2011 at 1:09 PM

Even I believe in Credit card usage when its necessary, but I do carry my credit card with me almost all the time.

Then again, I am not sure how much protected I am in case of credit card theft & misuse, fraudulent online usage. How do I find out about these? Does it differ from bank to bank?

One more thing, I was using my credit card without even signing the back of it for a long time, that means most merchants don’t verify the signature. How are we protected in case someone misuses my card and assuming that the signature he has put on transaction slip doesn’t match mine?

I guess it is one important parameter to understand in “Personal finance”, what do you say Vinaya?

Vinaya H S March 17, 2011 at 1:27 PM


Spot on. No one verifies the signature. Most don’t even bother about the photo as well (if you have one printed on the front of the card). The Terms and Conditions for lost card/fraudulent usage vary from Bank to Bank and within a Bank from one type of card to the other.

Vinaya H S March 17, 2011 at 1:29 PM


Wonderful comments indeed. I didn’t realize that I’d spark such a thoughtful discussion. Thanks again — your comments are what add real value to this blog.

Rohan Kaikini March 17, 2011 at 1:33 PM

Any review on how reliable CPP (Card Protection Plan) is? My risk profile is on the higher side, and I don’t mind paying a bit for CPP. Only concern is that it should work when needed.

@ Vinaya,
Thanks for writing this blog, it seriosly has made me re-think several of habits.. :) .. and i hope you update it more regularly..

Sam March 17, 2011 at 1:45 PM

Thanks for your useful posts! Like many others on this thread, cannot resisting commenting on this :-)

Sorry, I find the arguments in this and a credit card related post or two recently slightly specious, especially generalizations like ‘a credit card in your wallet is akin to a time-bomb waiting to diffuse’. A similar argument can be used against cars, using road accident statistics!

Vinaya H S March 17, 2011 at 2:51 PM


Thanks. :-) I will work on writing more frequently. Right now, it’s a balancing act between work, the blog, and other personal commitments.

A few months back, I’d run a reader poll on CPP @


He he he… :-) Point taken.

ashwin March 17, 2011 at 6:06 PM

@All Nice debate

I would like to tell my experience. I have been using citibank indian oil credit card for past 4 yrs. i spend everything using that card and have got full tank petrol free redeeming the points i have accumulated many times… :)

We need to use the credit limit smartly and never take forward the credit. i am successful in doing so.

And about online transactions, now there is OTP-one time password authentication for all online transactions using credit card. User needs to enter this # which he gets as a sms from the bank during the transaction or else the transaction will time out. Little cumbersome but another level of security.

I allways have an idea.. why dont the credit cards work like Debit cards when you swipe on the credit card machine at the merchant… remember, citibank debit card asks for an pin# to be entered when u swipe. If this is done for all the credit cards, we dont have to worry about the card being lost, paying protection money, and would save a lot of hassle.

And i wanted to answer another question in this thread. You can pay your credit card bill using TPT-third party transfer facility in ur online banking…its like ur sending money to any other account. I do it that way, so i don’t enter the credit card every time.

Vinaya H S March 18, 2011 at 6:06 AM


Does your credit card reverse the complete charge including service tax? Mine doesn’t:

herge March 19, 2011 at 8:40 AM

The bottom line to ensure you don’t carry over dues. To say I don’t use credit card because I have to do the herculean task of going home and remembering to take the card from my wallet is a silly excuse. Someone with not even that much responsibility should not manage finances of a household let alone write a blog!

Ketan March 19, 2011 at 10:53 PM

Off-topic comment:

The links in your comments are “no-follows”, so when you put your own links in the comments section (as you did pointing towards your own blog post), it does not get followed by search engines and hence does not update the page rank. (just an small SEO tip)

Here is the meaning of no-follow:


Vinaya H S March 20, 2011 at 10:05 AM


Thanks for the tip. :-)

Vinaya H S March 20, 2011 at 10:13 AM


Actually, it’s completely the other way around. It’s precisely because of such financial responsibility that I write this blog. :-)

What say?

Andrew Jackson February 11, 2013 at 3:42 PM


I am Andrew Jackson. I am a financial writer and want to contribute a guest post for your blog and it will be only published on your blog.

I will send my article as an attachment in the .txt or word format.

Hope you would like my proposal and give me an opportunity.

May I send my article?

Best Regards,
Andrew Jackson
Skype Name:a_jackson051

Yves Saint Laurent November 26, 2013 at 12:17 PM

???????????????????????????????????????????????????????????????????????????????????????????????????????????????? 3 ?
2 ??????? (?????????) ????????????????????????????? (618-907???) ??????3 ???????
Yves Saint Laurent

Previous post:

Next post: