What are cashback credit cards? Which are the best ones? How to pick?

With a cashback card, you can get a direct value back on your credit card purchases.

Cashback is the simplest form of benefit a credit card can offer you. You spend money and you get real value back, instead of earning rewards and later redeeming them for cash, vouchers or other items. 

While some of these cards offer direct cashback across selected categories like grocery and bill payments, others offer co-branded benefits on everyday brands like Amazon, Flipkart, Zomato, etc. Thereby, even if you are not a high spender, you can get a cashback card for using it on your day-to-day expenses.

"These cards are mostly targeted towards beginners and, generally, have a lower annual fee waiver condition of up to R  2 Lakh. Thus, cardholders who can spend around Rs.17,000 per month (approx) on everyday transactions like groceries or general online shopping can also optimize core benefits of the card," said Rohit Chhibbar, Head of Credit Cards, Paisabazaar.

Note that optimizing benefits is easier if you choose a card that matches your spending patterns. Hence, you must choose the right credit card- one that offers maximum value back on major spend categories.

"Assess your monthly expenses and identify the categories where you spend the most. Typically people spend more on categories such as groceries, fuel, dining, shopping, travel, and utility bills. This will help you prioritise the types of cashback offers that would benefit you the mos," said Adhil Shetty, CEO of BankBazaar.

Certain customers these days also have options to opt for a credit card that rewards them with cashback or points for every spend, this is typically 1 per cent. However, some cards can offer more depending on the type of the cards and eligible customer.

Even if you are not spending much, these cards give you cashback and reward points  every time you use your card to make a transaction. There could be some exceptions so at the time of applying you much thoroughly check the credit card and its features to ensure it fits your requirements.  

For instance, if a substantial part of your monthly spends goes towards utility bill payments, you can choose from Airtel Axis Bank Credit Card or Axis Ace Credit Card, said Chhibber.

Similarly, for an Amazon loyalist, Amazon Pay ICICI Credit Card can be a good option.

You can also select a card based on whether you have brand preferences or not.

"For benefits on multiple brands, HDFC Millennia can be a suitable option, whereas, for high value back without any merchant restrictions, Cashback SBI Card can be considered," said Chibber.

Point to note: Many cashback credit cards come with annual fees. "Some cards waive the annual fee if you meet a minimum spending requirement, so factor that when you apply for a cashback credit card," said Shetty. 

Let's discuss some of these cards in detail to understand their pros and cons:

According to Paisabazaar, these five are the best cashback cards in the market currently

1. Cashback SBI Credit Card

The annual fee: Rs 999

Key benefits: 5% cashback on all online spends with no merchant restrictions

1% cashback on all offline spends

Annual fee reversal on spending Rs 2 Lakh in a year

2. Axis Bank Ace Credit Card
The annual fee: Rs 499
Key benefits: 

5% cashback on using Google Pay for utility bill payments- electricity, internet, gas, DTH, mobile recharges, etc

4% cashback on Swiggy, Zomato & Ola

2% cashback on all other spends

Annual fee waiver on spending Rs 2 lakh

3.Amazon Pay ICICI Credit Card

Annual fee: Nil
Key benefits: 5% cashback on Amazon for Prime Customers

3% cashback on Amazon for Non-Prime Customers

2% cashback on 100+ partner merchants

1% cashback on all other transactions

4. Airtel Axis Bank Credit Card

Annual fee: Rs 500

Benefits:  Amazon e-voucher worth Rs 500 as welcome benefit

25% cashback on Airtel Mobile, Broadband, WiFi and DTH bill payments via Airtel Thanks App

10% cashback on utility bill payments via Airtel Thanks App

10% cashback on Swiggy, Zomato, and BigBasket

1% cashback on all other spends

Annual fee waiver on spends of Rs 2 Lakh in a year

5.HDFC Millennia Credit Card

Annual fee: Rs 1,000

Key benefits: 1000 Cash Points as welcome benefit

5% Cashback on Amazon, BookMyShow, Cult.fit, Flipkart, Myntra, Sony LIV, Swiggy, Tata CLiQ, Uber and Zomato

1% cashback on all other spends (except Fuel) including EMI & Wallet transactions

Gift voucher worth Rs. 1,000 on spending Rs. 1 Lakh & above in a quarter

Annual fee waiver on spending Rs. 1 Lakh or more in a year
 

Note: All card information is sourced from the card provider website as of  18 July, 2023.

While the specific best credit cards for cashback in India can vary based on individual spending habits and preferences, here are some options known for their cashback rewards, according to an analysis by BankBazaar:  Yes Bank Finbooster Credit Card, HDFC Bharat Credit Card, HSBC Smart Value Card, HDFC Bank MoneyBack Credit Card among others.

How to choose the right cashback credit card and maximise it?

The choice of best credit card for cashback depends on how you plan to use the card.

Since credit card benefits are usually inclined towards one or two specific categories, understanding your need is very important while choosing any type of card. "Choose a cashback credit card that aligns with your spending habits and offers high cashback rates on the categories where you spend the most. This ensures you earn maximum rewards for your regular expenses," said Shetty. 

"For example, if you plan to use the card mainly for groceries, the Standard Chartered Manhattan Platinum Credit Card would be good for you. However, if you wish to be rewarded for fuel expenses, their Super Value Titanium Credit Card would be better,"according to Paisabazaar.
 

Once you have narrowed down your options, you should compare the cards on the basis of annual fee, cashback rate, bonus categories, etc.

 Make it a habit to use your cashback credit card for everyday expenses like groceries, dining, fuel, and utility bills. "By using your card strategically, you can earn cashback on your routine spending.  Also, it is crucial to pay your credit card balance in full and on time each month. By doing so, you can enjoy the benefits of cashback rewards without incurring additional costs," said Shetty. 

The easiest way to maximize the benefits on your cashback credit card is to use it for the bonus category of expenses. "For example, if your cashback credit card offers fuel benefits, you must put your fuel expenses on this card to make the most of it," according to Paisabazaar.

Which is better- cashback or rewards?

 Both offer an incentive for using your card. While cashback is simple to understand and manage, reward points are a bit complicated because of the extra step of first accumulating them and then redeeming them at a later stage. Some cards allow you to convert the reward points into cash but the rate may not be the same. At the same time, there are rewards credit cards that allow conversion into miles which could be better than cashback, especially if you travel often. So, you must make a choice depending on your needs.

Should I get a cashback credit card if I have a reward credit card?

You can consider a cashback credit card as well. This is if the rewards credit card does not cover a certain spending category that you tend to spend most on.