A credit card advertising "10% Cashback on Dining" sounds incredible, but the fine print almost always contains a crucial limitation: the Reward Cap.
The Illusion of High Rates
Suppose a card offers 10% cashback on dining, capped at ₹500 per billing cycle.
If you spend ₹5,000 on dining, you get your ₹500. Your reward rate is exactly 10%.
But what if you spend ₹15,000 on dining? You still only get ₹500. Your effective reward rate drops drastically to just 3.3%.
Why Caps Matter
Reward caps fundamentally alter the profitability of a card based on your spending volume. If you are a high spender, a card with a lower uncapped reward rate (e.g., a flat 2%) will often outperform a card with a high rate but low caps.
How to Navigate Caps
- Know your limits: Always check the MITC (Most Important Terms and Conditions) for category-specific caps.
- Spread your spends: This is why a two-card strategy (Smart Combo) is effective. Once you hit the cap on Card A, you switch your spending to Card B.
- Don't overspend: Never spend extra money merely to earn rewards; the cap ensures the bank always wins if you do.