More bang for your buck

Spend more and earn more seems to be the mantra for credit card companies.

In their attempts to tap the potential credit card consumer base, banks are offering cash back schemes and waivers on every second purchase.

And now ABN AMRO has gone ahead and launched "One credit card", which promises lifetime cashback on every purchase.

With just over two crore credit card users, and new entrants like Barclays and Deutsche Bank stepping up competition in the market, banks in India have still not attained a consumer base that can match up to, says, Latin America.

Lifetime free credit cards are a thing of the past. And so is waiver of the 2.5 per cent fuel surcharge that was the rage a season ago. But a new credit entry on your credit card bill may come as a bit of a surprise.

Banks like ICICI, HSBC and ABN AMRO have promotional cash-back schemes from time to time that give cash back on a minimum spend on the card.

However, ABN AMRO's latest offering is one-of-its-kind. Manek Fitter, partner, financial services, Ernst & Young explains, "Cash backs are techniques being used by banks to boost their card base in order to break even. The way it would work is that of the 4-5 per cent that the merchant passes on to the credit card company, the company will return 1-2 per cent to the customer."

Even though banks like Citibank and American Express are not offering similar schemes, Fitter feels that the trend will continue for at least the next five years considering the number of players getting into the credit card business, including LIC.

ABN AMRO's card, which will get you cash-back up to Rs 500, calculates the percentage on the total bill amount at the end of the billing cycle and then divides it into spending avenues like petrol, dining out and groceries. So, if you've spent a total of Rs 7,000 on your credit card, on every category of purchase you get cash back of 1.5 per cent.

The percentage amount is also segmented between Rs 0-5,000; Rs 5,000-10,000 and above Rs 10,000. Clearly ABN AMRO is targeting the salaried class to increase its market share.