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Why Banks are Devaluing Popular Credit Cards? Know the Full Reason

Credit card devaluation, a recent trend in the banking industry, has affected various banks’ credit card offerings. For instance, Axis Bank and HDFC Bank have reduced the benefits and rewards associated with their popular credit cards. These changes often involve altering terms, rewards programs, or fees, ultimately diminishing the card’s value for users.

HDFC Bank, for instance, introduced new eligibility criteria for accessing lounge benefits on its Regalia Cards, starting from December 1, 2023. Cardholders must now spend a minimum of Rs 1 lakh in a calendar quarter to enjoy these benefits. Once the spending threshold is met, customers are eligible for only two complimentary lounge access vouchers, with further access dependent on their card spending.

Additionally, the process for availing these benefits has been revamped. Cardholders meeting the spending criteria must visit the bank’s website to generate lounge access vouchers to claim their benefits.

Axis Bank, on the other hand, revised the terms of its popular Magnus Credit Card in September. Users lost the significant benefit of 25,000 monthly reward points, and the annual fee increased. The transfer ratio for reward points to airline and hotel loyalty programs also changed, reducing the value of reward points for cardholders.

HDFC Bank made changes to its Diners Club Privilege product, discontinuing the 2X Reward Points on weekend dining and removing golf game benefits. They replaced air miles redemption with dining vouchers, which could be advantageous for some but a drawback for frequent travelers.

Also read: 5 Best Ways to Avoid Credit Card Debt

SBI Cards discontinued the 5 percent cashback on various services and outlets, affecting cardholders’ benefits.

The devaluation of credit cards in 2023 can be attributed to economic conditions following the global pandemic, notably inflation. Rising costs of goods and services have forced credit card companies to reassess the sustainability of their rewards programs. To cope with these economic changes, credit card issuers have adjusted their rewards structures, often resulting in fewer rewards, increased redemption thresholds, or the reduction of ancillary benefits. This trend reflects a shift towards more conservative rewards offerings in the industry.

According to Adhil Shetty, the CEO of Bankbazaar, the ongoing devaluation of credit card rewards is a response to various challenges, including inflation, margin pressures, and increased competition. In the current credit card ecosystem, there is a shared responsibility to ensure profitable and sustainable growth. With India’s credit landscape maturing amid high inflation, credit card providers must adapt their rewards programs to maintain sustainability while delivering an exceptional customer experience.

The proliferation of digital payments is evident, with 93 million credit cards in circulation and an average monthly expenditure of approximately Rs 5,200. As India’s credit usage continues to advance, and more individuals become eligible for initial credit lines, credit card companies will need to periodically review and adjust their rewards programs to ensure long-term viability.

To make the most of your credit card benefits, it’s essential to be well-informed about the rewards and perks your card offers. Regularly utilize your reward points instead of accumulating them indefinitely. Additionally, stay vigilant about any changes that could impact your card’s benefits, such as alterations to the rewards structure, milestone benefits, annual fees, and other terms and conditions. This proactive approach will help you maximize the value of your credit card.

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