It's easy to look at a credit card advertising "Up to 5% returns!" and assume it's the best card on the market. However, a higher advertised rate often hides systemic bottlenecks.
1. The Exclusions List
A card might offer 5% back, but if it excludes utilities, insurance, rent, education, and government transactions, a huge portion of your monthly budget will earn absolutely nothing. A card with a flat 1.5% on all spends might actually yield more total cash at the end of the year.
2. The Milestone Trap
Some cards boast high returns only if you hit specific annual spending milestones (e.g., "Get 10,000 bonus points on spending ₹5 Lakhs"). If your natural spend is ₹4 Lakhs, reaching for that milestone will cost you ₹1 Lakh in unnecessary spending to earn ₹2,500 worth of points. This is a net loss.
3. Redemption Devaluation
Banks frequently devalue their reward points. A card with a high earning rate today might slash its redemption value tomorrow. Cashback cards are generally immune to this specific type of devaluation.
Always look at the holistic picture of how a card treats your entire spending profile, not just its headline marketing rate.