Most people pay for big purchases, be it a car, jewellery or a child’s school fees, by bank transfer, cheque or loan. A few swipe a credit card instead to earn the reward points, air miles and hotel nights that come with a big spend. The reward can run into tens of thousands of rupees. So can the loss, if you run into a credit limit wall, a merchant’s surcharge, or a wrongly coded card machine. Here is how to tell which side of the swipe you will land on.
First, check the limit
The first hurdle is common to every big-ticket purchase. Few people carry a ₹5 lakh to ₹10 lakh limit, so a single swipe usually gets declined.
The quickest fix is a pre-approved limit enhancement. “It is only quick if you have a pre-approved limit enhancement offer available,” says Akash, a credit card enthusiast who asked that his surname be withheld for privacy reasons.
“Banks usually keep offering enhanced limits via SMSes. Banks like HSBC can offer up to 50%, and some banks even offer up to 100%.” If no offer is waiting, a manual request with salary slips and income tax returns usually takes one to two weeks.
There are other ways around it. You can split the amount across two or more premium cards. Or you can swipe up to your limit, repay the bank at once to reset it, and swipe again over two or three days. “Temporary credit limit increases are tough,” says Niraj Dugar, co-founder of Holistic Prime Wealth. “Personally, I used cards with lower limits and paid off immediately to use again over two to three days.”
The reset trick has a catch, though. Banks cap their best reward rates at your actual credit limit. Akash points to Axis Bank’s accelerated earning structure, where spending more than ₹1.5 lakh can fetch up to 14 per cent in rewards. “But that accelerated rewards limit is capped at your credit limit,” he says. “If your limit is ₹5 lakh and you spend ₹6.5 lakh by resetting the limit, the portion above your credit limit won’t get the accelerated 14% rate. It will fall back to the base 4.8% rate.”
The merchant’s fee, and a code that can wipe out your rewards
Once the limit is sorted, the merchant becomes the problem. Reserve Bank of India (RBI) rules bar merchants from passing the merchant discount rate (MDR), the fee a bank charges a shop for accepting cards, on to customers. For the merchant, though, it remains a real cost, typically 1 to 2 per cent.
“MDR is a real cost for a merchant. If you negotiate a discount, the merchant cannot take another 2% hit on the whole transaction,” says Akash. “Usually, if the fee is around 1% to 2%, they set it around 1% to 1.5% depending on your negotiation skills.” Dugar agrees: “MDR should be negotiated with the vendor. Anything under 1.5% is good, but you have to use the right cards to swipe.”
The bigger risk is less obvious. A business can have more than one line of work, and the machine at the counter may be registered under the wrong merchant category code (MCC), the code that tells the bank what kind of business is charging you. Car dealerships are a common example, since many also sell insurance. “These automobile dealerships also have side businesses wherein they sell insurance,” Akash says. “If they swipe your card on a machine tagged under an insurance MCC, you won’t get rewards. You’ll get zero.”
The fix is a test run. “MCC is the best way to figure it out. Swipe for a small amount, call the bank and check,” advises Dugar. Akash adds: “Do a test transaction and call the bank immediately. They will tell you if the code is insurance or automobile. If it is tagged incorrectly, ask the dealer for a machine dedicated to their car business.”
What is actually left after the surcharge and the fee? A car as an example
Rewards look generous until the costs come off. Cars make a useful example, because the amounts are large and the costs are easy to count. Take a ₹7 lakh car bought on two cards, the Axis Bank Magnus for Burgundy and the HSBC TravelOne, with a dealer surcharge of 2 per cent plus 18 per cent Goods and Services Tax (GST).
On the Magnus for Burgundy, the first ₹1.5 lakh earns 12 points per ₹200, or 9,000 points. The remaining ₹5.5 lakh earns 35 points per ₹200, or 96,250 points. That makes 1,05,250 points, which become 84,200 Air India miles at a 5:4 transfer ratio. On the HSBC TravelOne, the entire ₹7 lakh earns one point per ₹50, or 14,000 points, which move to the hotel group Accor at 1:1.
| How credit card rewards work on a car purchase: Two examples | ||
| Illustration: ₹7 lakh car purchase | ||
| Particulars | Axis Bank Magnus for Burgundy | HSBC TravelOne |
| Purchase amount | ₹7,00,000 | ₹7,00,000 |
| Reward calculation | ||
| First ₹1.5 lakh | ₹1,50,000 ÷ 200 × 12 = 9,000 points | |
| Remaining ₹5.5 lakh | ₹5,50,000 ÷ 200 × 35 = 96,250 points | |
| Entire ₹7 lakh | ₹7,00,000 ÷ 50 = 14,000 points | |
| Total points earned | 1,05,250 | 14,000 |
| Transfer partner | Air India | Accor |
| Transfer ratio | 5:4 | 1:1 |
| Points/miles received | 84,200 | 14,000 |
| Assumed value per point/mile | ₹1 | ₹2 |
| Gross reward value | ₹84,200 | ₹28,000 |
| Dealer surcharge (incl. GST) | ₹16,520 | ₹16,520 |
| Annual fee (incl. GST) | ₹35,400 | ₹5,900 |
| Net reward value | ₹32,280 | ₹5,580 |
| Net return | 4.61% | 0.80% |
Annual fees are as listed on the banks’ official websites: ₹30,000 plus GST for the Magnus for Burgundy and ₹5,000 plus GST for the HSBC TravelOne.
The figures cover this one purchase only. Rewards rise with the amount spent on a card, while the annual fee is a fixed cost, deducted here in full from this single transaction.
Beyond cars: jewellery and school fees
Other big-ticket spends follow their own rules. Most card issuers exclude jewellery and bullion from rewards, though cards such as the HDFC Bank Infinia and some ICICI Bank cards still reward them. The upside is that jewellers generally do not add an MDR surcharge.
Education fees earn rewards on cards such as the Axis Bank Magnus for Burgundy, HDFC Bank Infinia, DCB Bank and ICICI Bank cards. The condition is that you pay the institution directly, not through a third-party payment platform.
Before you swipe
Do not treat this as an impulse purchase. Check with the merchant first, run a small test transaction, and confirm the category code with your bank. Otherwise, you could swipe several lakh expecting a windfall and end up with zero points and an extra surcharge.
It also helps to speak to someone who has pulled this off before. Once the checks line up and the net maths is clearly positive, go ahead. Remember, what the cards demand in return: steep eligibility criteria, hefty annual fees, or minimum relationship values with the bank. If the effort, fees, or redemption rules do not suit you, a plain bank transfer is the simpler way to pay.
