Many credit cards promise rich rewards, but most also charge a yearly fee. According to reporting by NDTV Profit, the real question is whether your rewards beat that fee.
For you, the answer depends on how much you spend and how you pay. A quick sum can tell you in five minutes if your card is worth keeping.
Key takeaways
- A card is a good deal only when yearly rewards are higher than the fee plus GST.
- Low spenders often lose money on cards with high annual fees.
- Carrying a balance wipes out rewards very fast, because card interest is steep.
- You can often ask the bank to waive or cut the fee.
- Check the real value of points, not the headline reward rate.
How card rewards and annual fees work
When you spend on a credit card, the bank gives you something back. It may be reward points, cashback, air miles or discount vouchers. The bank pays for this from fees it earns from shops and from you.
The annual fee is what you pay for holding the card. Some cards charge a joining fee as well. GST of 18% is added on top of these fees, so a ₹2,500 fee really costs ₹2,950.
Points are not always worth one rupee each. A point may be worth 25 paise on one card and 50 paise on another. Often the best value comes only if you redeem points in a certain way, such as for travel. That's why the reward rate on the brochure can mislead you.
What it means for your wallet: a worked example
Let's say your card has a ₹2,500 annual fee. With GST, you pay ₹2,950. Say the rewards are worth about 1.5% of what you spend. The table shows what you'd actually earn.
| Monthly spend | Yearly spend | Rewards at 1.5% | Fee with GST | Net gain or loss |
|---|---|---|---|---|
| ₹10,000 | ₹1,20,000 | ₹1,800 | ₹2,950 | Loss of ₹1,150 |
| ₹20,000 | ₹2,40,000 | ₹3,600 | ₹2,950 | Gain of ₹650 |
| ₹30,000 | ₹3,60,000 | ₹5,400 | ₹2,950 | Gain of ₹2,450 |
| ₹50,000 | ₹6,00,000 | ₹9,000 | ₹2,950 | Gain of ₹6,050 |
The break-even point here is about ₹1,97,000 a year, or roughly ₹16,400 a month. Spend less than that and the card costs you money.
Now think about interest. Say you miss the due date on the full bill. Banks usually charge around 3% to 4% a month. On a ₹20,000 balance, that's ₹600 to ₹800 in one month. One late payment can cancel a whole year of rewards.
Who is affected
This matters most to three groups of people.
- Light spenders: You use a card only a few times a month. A paid card may never pay for itself.
- Heavy spenders: You put rent, fuel, groceries and bills on one card. A good rewards card can save real money.
- People who carry a balance: For you, rewards hardly matter. The interest is the bigger cost. Check the interest rates before you decide.
First-time card holders are also affected. Many are drawn in by a welcome gift, then forget the fee that comes next year.
What to do now
You don't need any special tools. Just follow these steps before your card renews.
- Add up your card spending for the last 12 months from your statements.
- Multiply that by the real reward rate. Use what a point is worth when you redeem it.
- Subtract the annual fee plus 18% GST.
- If the result is negative, call the bank and ask for a fee waiver.
- If they say no, move to a lower fee or free card.
Many banks waive the fee if you spend a set amount in a year. Check that limit and see if you're close. Don't spend extra just to hit it, though. Spending more to save a fee is a bad trade.
If you have card debt, think about a cheaper way to clear it. A personal loan often costs less than card interest. Use the EMI calculator to compare before you act. You can also follow our news hub for more updates on cards and borrowing.
Frequently asked questions
Is a credit card with an annual fee worth it?
It is, if your yearly rewards are higher than the fee plus GST. If you spend little, a free card is usually the safer choice.
Can I get my annual fee waived?
Often you can. Many banks cancel the fee if you reach a yearly spend target. You can also call customer care and ask, especially if you've been a good customer.
Do reward points have an expiry?
On many cards they do. Terms differ by bank and card, so check your card's rules. Redeem points on time so you don't lose them.
BankCreds analysis
This story matters less than the headline suggests. Rewards versus fees is an old question, and the answer hasn't changed. It all comes down to your own spending.
Who gains and who loses
Take a salaried household that spends ₹15,000 a month on a card. That's ₹1,80,000 a year. At a 1.5% reward value, the rewards come to ₹2,700. A ₹2,950 fee with GST leaves them ₹250 behind. Now take a family spending ₹40,000 a month. Their rewards are ₹7,200, so they're ₹4,250 ahead.
The lesson for this week is simple. Don't judge a card by its reward rate alone. Don't assume a free card is better either. A free card with weak rewards can still lose to a paid card if you spend a lot. But no reward beats the cost of unpaid bills, which are charged at high interest.
This section is BankCreds' own assessment of what the development means for Indian borrowers and savers. It is independent commentary, not part of the source reporting above.
Source & references
- NDTV Profit — originating report https://www.ndtvprofit.com/personal-finance/credit-card-rewards-vs-annual-fees-are-you-really-getting-a-good-deal-12235642
Source links are shown as plain text, not clickable links. Copy a URL into your browser to read the original report.
Editorial note & disclaimer
How this was reported. The development above is attributed to the source or sources listed. BankCreds does not independently verify a third party's reporting; where a figure or a regulatory position is stated as fact, it is either attributed or drawn from the regulator's own published material. Everything under "BankCreds analysis" is our own assessment.
Rates and figures. Interest rates, per-gram values and premium bands quoted here are indicative, move daily, and differ by borrower profile, city and lender policy. Confirm the final number with the institution before you act on it — the sanction letter or policy schedule governs, not a news report.
Not financial advice. This article is general information for an Indian audience. It is not investment, tax, credit or insurance advice, takes no account of your circumstances, and BankCreds is not a lender, broker, distributor or advisor. Consider speaking to a SEBI-registered investment adviser or a qualified professional before acting.
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