Map spending pattern, pick credit cards that align with it to boost savings

Relying on generic cards that offer flat, low reward rates can reduce your savings

A recent report by 1Finance, a Mumbai-based personal finance advisory firm, says most credit card users do not maximise the savings from their cards. The average cardholder saves only around 4 per cent on annual spending. With the right card strategy, savings could rise to 10 per cent, and even 13-14 per cent for high spenders.

 

Why users fail to optimise savings

 

Many users keep cards that do not suit their spending. “People often hold generic cards that pay flat, low rates on their biggest spending categories,” says Animesh Hardia, Senior Vice-President, Quantitative Research, 1Finance.

 

“Many users spend more time comparing cards than studying their spending patterns,” says Adhil Shetty, Chief Executive Officer (CEO), BankBazaar.

 

Poor card selection means much of their spending earns only the base reward rate of roughly 0.5 to 3.3 per cent on default spends.

 

Redemption is another weak spot. “Points that may fetch about Rs 1 each against travel are often cashed out as statement credit at Rs 0.15 to Rs 0.20,” says Hardia.

 

Higher rewards usually depend on spending through specified categories, merchants or the bank's reward portal, but many users fail to use these accelerated reward channels.

 

Cards also lose relevance as spending changes. “Spending habits shift over time, but the card often remains the same,” says Mahesh Shukla, Founder and CEO, PayMe.

 

Map spending first

 

Users should study 6-12 months of spending data before choosing a card. Shukla says this can reveal everyday spending and seasonal spikes.

 

For most people, two or three categories account for 60 to 70 per cent of total spending. “Once spending categories are clear, it becomes easier to choose a card that rewards those categories,” says Shetty.

 

Users should select their primary card based on their top two or three spending categories instead of relying on generic cashback when another card or channel may offer better value. “Credit card benefits can range from 3 per cent to 16 per cent depending on the card,” says Arjun Guha Thakurta, Executive Director, Anand Rathi Wealth.

 

A spending scan can also help users plan insurance premiums, school fees, festive purchases and annual trips. “Planning large seasonal payments on cards with boosted rewards can improve yearly savings without raising overall expenditure,” says Shams Tabrej, Co-founder and CEO, Ezeepay.

 

Neil Thakur, Head of Global Solutions Consulting, BUSINESSNEXT, suggests that AI-based platforms are now available to help users choose the right card for each spend.

 

Higher-end cards offer greater benefits. But they make sense only when the cardholder's regular spending can unlock their milestone rewards.

 

Check fees and other terms

 

The annual fee must be justified by the value received from the card. “If the annual fee outweighs the benefits received, the card is not doing its job,” says Shukla.

 

Thakur says users should check reward caps, redemption rules and spending thresholds. It is also important to assess reward expiry, merchant acceptance, category-specific offers and exclusions (spends that are not eligible for rewards).

 

Keep the right number of cards

 

Collecting cards without a strategy is not advisable. “Spreading spending across several cards without a plan scatters rewards,” says Tabrej.

 

Thakurta adds that too many cards also make it difficult to track benefits. Card users could also miss payment due dates.

 

Each card should have a clear role, such as everyday spending, travel or online shopping. “Three to four cards can cover almost any spending profile,” says Hardia.

 

Review card mix every year

 

Users should review their spending pattern once a year. “This can reveal whether a different combination of cards could deliver better value,” says Shetty. They should also review benefits periodically because issuers revise them frequently.

 

Dos and don'ts for optimising savings

 

•         Track reward expiry dates; use points before they lapse.

•         Check category-specific offers; route eligible spending accordingly.

•         Understand spending exclusions before using rewards.

•         Factor in redemption fees before calculating the real value of points.

•         Do not overspend just to meet milestone thresholds.

•         Avoid carrying unpaid balances; interest costs can wipe out rewards.

 

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The writer is a Mumbai-based independent journalist.