Some of the pitfalls of the cash-back credit cards are:
Cash-back offers are available with minimum purchase limit. For instance, HDFC Bank Business Gold Credit Card gives only 1 per cent cash back on domestic air tickets and utilities bill payments, for a minimum expenditure of Rs 7,500. Similarly, HDFC's value Plus Credit Card which gives 5 per cent cash-back on money spent on hospitals, medical stores and booking of railway tickets. Moreover, it comes with the condition that cash-back will only be valid if the outstanding amount on the current statement of the customer is higher than Rs 10,000.
In order to protect the bank's interest, the bank usually puts a cap on maximum monthly amount that can be claimed in the form of cash-back. This helps banks to estimate their claim liability well in advance. The cap can either be in terms of maximum money that can be claimed or number of transactions on which one can claim cash-back.
Moreover, cash-back cards are not free. Banks often charge some amount of joining fees. In, many cases, banks pitch their customer by saying that there are no annual fees or joining fees for the card but then in reality it might not be the same. Some charges can be waived off if one spends a minimum sum within a stipulated time.
One cannot even club cash-back offers given by different merchants from which the card has tie-ups. For instance, if one has a credit card, which has tie-ups with vendors providing two offers like 10% cash-back on movie tickets and one ticket free for every two movie ticket purchased during a particular month. Here, one can only avail one of the two offers.
Cash-backs don't happen immediately. Usually, it takes up to 20-30 days for the cash-back money to reflect in the card statement.