Credit cards are everywhere today. Banks and financial institutions aggressively market them with the promise of “rewards” — cashback, free air miles, shopping vouchers, and even luxury perks like airport lounge access. On the surface, it feels like a win-win deal: you spend, you swipe, and you earn something back.
But here’s the hidden truth: those rewards are never free. They are carefully designed traps. The cashback you receive, the lounge access you enjoy, or the free flight voucher you unlock — all of it comes at a cost. You may not see the cost immediately, but it hides in annual fees, interest rates of 30–40% per year, forex markups, late payment charges, and overspending triggered by milestone bonuses.
The game is simple: banks hand you shiny points, but in return, they take your money.
A Personal Story: When My Brother Was Tempted
Just last week, my brother, who is relatively new to credit cards, was offered a premium card by his bank. It came with everything — complimentary hotel vouchers, free movie tickets, bonus points on every spend, milestone benefits, and unlimited lounge access.
For a moment, he was impressed. “Wow, this seems like a great deal,” he said.
But then his business instincts kicked in. He asked me straight: Yaar, itna free kaise? What’s the catch?
That question made me smile. Because I had learned the answer the hard way.
I told him: nothing in these offers is truly free. Banks are not in the business of giving away holidays or gifts. They are in the business of making money. And the way they make money is by encouraging you to spend more than you normally would — and by charging you heavily when you cannot clear the entire bill in full.
That is the entire business model of rewards.
The Numbers Speak for Themselves
This isn’t just my personal opinion. The data tells the same story.
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Credit card dues in India have already crossed ₹2.5 lakh crore in 2025.
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Surveys reveal that more than half of reward card users admit they spend extra just to unlock a milestone bonus.
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Banks know this behaviour very well. That “free” voucher is just bait. The real money comes when users roll over balances at 30–40% interest.
For the banks, rewards are an investment. They give you a small token upfront, but in return, they collect far more in fees and interest.
So when my brother asked me, kya chal raha hai? my answer was simple: this is not a gift. It is a carefully designed system to hook you in, and once you’re trapped, getting out is extremely difficult.
The Psychology Behind the Trap
Why are these cards so effective? Why do otherwise sensible people fall for them again and again? The answer lies in psychology.
1. The Swipe Effect
When you pay in cash, you feel the pain immediately. Handing over hard currency creates discomfort. But when you swipe a credit card, that pain is delayed. The actual payment happens weeks later. Behavioural economists have shown that this time gap tricks the brain into underestimating the true cost.
2. The Milestone Game
Credit card companies love milestones. Spend ₹50,000 in a month and get bonus points. Spend ₹2 lakh in a year and win a holiday voucher. Suddenly, you are not buying what you truly need. You are buying to hit a target.
I’ve seen people add unnecessary items to their shopping carts, book tickets earlier than required, or even prepay services just to reach a milestone before the deadline. The card makes it feel like an opportunity, but in reality, it is a nudge that manipulates you into overspending.
3. The Illusion of Freebies
A free lounge visit feels like a luxury upgrade. A free movie ticket feels like a win. But these perks blur the line between wants and needs. Slowly, you start believing that spending on a credit card is smarter than spending cash. That illusion is what keeps you hooked.
When Rewards Turn Into Real-Life Losses
The trap doesn’t just stay on paper. It seeps into daily life.
I’ve seen people delay necessary purchases, cancel family trips, or even postpone medical treatments because their card dues ballooned unexpectedly.
The burden is not only financial but emotional. Money that was supposed to bring comfort starts creating tension at home. Families argue over bills. Individuals lose sleep over due dates. Small businesses feel the strain when cash flow gets diverted into credit card payments.
Here’s the most dangerous part: once the dues start piling up, the interest snowballs. A small ₹10,000 balance can double within two years if you only pay the minimum amount. That “free” voucher or lounge visit doesn’t look so free anymore.
How the Trap Expands
Many people start with just one card. But soon, they are tempted by new offers. Before they know it, they’re juggling three or four cards — each with separate billing cycles, fees, and dues.
It starts with premium cards that promise “exclusive benefits.” But each of these cards comes with high annual fees. To justify those fees, people spend more — often unnecessarily. Slowly, the balances roll over.
Some people manage to climb out of this debt spiral, but only after years of sacrifice and strict repayment. Others remain trapped, paying interest month after month, with no end in sight.
The Real Business Model of Rewards
Let’s strip it down.
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Banks earn from annual fees. Premium cards can charge anywhere between ₹5,000 to ₹10,000 per year.
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They earn from transaction charges. Every time you swipe, the merchant pays a fee.
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They earn from forex markups. International transactions carry hidden charges, usually around 3%.
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And they earn massively from interest. Once you carry a balance, you’re paying 30–40% per year.
The so-called “rewards” are just tiny percentages of what you spend. At best, you may get 1–2% back in value. But if you ever slip into revolving credit, the bank earns 30% from you. That’s the trade.
The Emotional High of Spending
There’s another layer to this: the emotional thrill.
Rewards cards don’t just give you cashback; they make you feel like a smart spender. Each time you unlock points or vouchers, your brain releases dopamine — the same chemical linked to gambling wins.
This psychological trick keeps you coming back. You’re not just shopping, you’re “playing the game.” But unlike casinos, the house always wins.
A Simple Rule to Protect Yourself
So, how do you escape this trap? The answer is not to reject credit cards completely, but to use them with discipline.
Here are the golden rules:
1. Always Pay in Full
If you cannot clear your entire bill every month, do not use the card. Revolving balances at 30–40% interest destroy wealth faster than anything else.
2. Do the Math
Calculate how much you’ve paid in annual fees, interest, and late charges over the past year. Compare that to the value of rewards you received. For most people, the costs far outweigh the benefits.
3. Stop Spending for Milestones
If you are buying things just to unlock a bonus, stop. That’s not saving — that’s overspending disguised as a deal.
4. Simplify Your Cards
One simple, no-fee card for emergencies is enough. Cancel the rest, especially premium cards that tempt you into milestone traps.
5. Treat It Like a Debit Card
Spend only what you already have in your bank account. If you treat the card like borrowed money, you will eventually fall into the interest cycle.
What I Told My Brother
When my brother asked me whether he should take that fancy card, I told him something very simple:
“The best reward is not points, not cashback, not free upgrades. The best reward is peace of mind. And you only get that by staying debt-free.”
So the next time a bank pitches you an aspirational “metal” card with glossy brochures and big promises, pause. Ask yourself: What is the real cost?
If the answer is anything beyond zero, walk away.
Because no cashback or lounge visit is worth losing your financial freedom.
Final Thoughts
Credit card companies are masters of behavioural economics. They know how to design milestones, how to trigger spending urges, and how to mask true costs. Rewards are just the bait. The real trap lies in the interest and fees.
Millions of people are silently paying for their “free” perks every year. And the numbers are growing.
If you want to stay safe, remember one rule above all: the house always wins.
Your job is not to play the bank’s game. Your job is to protect your money, your peace, and your future.
Because in the end, the smartest financial hack is not earning rewards. It’s avoiding the trap altogether.
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