Reduce slippage with gift vouchers
Most cards out there have a very standard reward structure: something on the lines of 6 points for every ₹200 (called quantum henceforth) spent. While this might give an enticing rate of 3% returns, the actual return that we get can often be much lower. For instance, let's assume that we spend ₹250 on a transaction - the actual reward rate is 6/250 = 2.4% and not 3.0% . This loss of 0.6% is defined as slippage.
The experiment
I compiled together all transactions I made on taxi apps over the last 4 years, and simulated the effective reward rate for a set of cards (ones that I own mostly)
| Card | Quantum | Points per Quantum | Actual Reward Rate | Slippage |
|---|---|---|---|---|
| Diners Black | ₹150 | 5 | 2.54% | 0.79% |
| Axis Atlas | ₹100 | 4 | 3.36% | 0.64% |
| Magnus | ₹200 | 9.6 | 2.92% | 1.88% |
| Vistara Ultimate | ₹200 | 6 + (4.8 towards milestone) | 4.23% | 1.17% |
| Max(above) | N/A | N/A | 4.37% | N/A |
| Magnus (with monthly 1L spend) | ₹150 | 9.6 + 20 towards milestone | 22.92% | 1.88% |
From this analysis, there are a couple of major takeaways:
- Cards with milestone benefits don't suffer from slippage, as any amount that is spent counts towards the milestone. This shows up in the great rate for Axis Vistara Infinite, but even more so on the Magnus assuming a monthly 1L spend. Amex Platinum travel is another great card with milestone bonuses that works well this way
- The smaller the quantum, the better is the reward rate in general; this shows up in Axis Atlas, which doesn't suffer as much relatively due to a quantum of ₹ 100
- Choosing the card depending on transaction value can get you a small gain in the overall efficiency.
Gift vouchers and removing slippages
Vouchers for a number of brands can be purchased online, that let you load up a wallet towards future purchases. Some of these include the Gyftr portal for HDFC, Axis, SBI, StanC etc. , direct vendor websites (eg: Uber), Amazon gift card store, MagicPin, NearBuy etc. vouchers are mostly immune to slippage - except for the initial transaction used to buy the card. Using our earlier example of 6 points for ₹200 - if we buy a voucher for ₹2500, we get an effective reward rate of 2.88%, which is a lot closer to the ideal 3%. Furthermore, a lot of these portals give out vouchers at an additional discount (eg: 5X points for SmartBuy Infinia / Magnus at the time of writing), which brings the overall reward rate even higher! Keep an eye on the Technofino community for good offers on cards
There are a couple of things to be careful with vouchers:
- Ensure you read the terms and conditions - specifically around whether a voucher may be split across multiple transactions, and how many vouchers may be used for a single transaction.
- Buy only what you need - vouchers have an expiration date; ensure that you buy what you need, and keep track of your vouchers