Credit card rewards, benefits cut: What options do customers have?

RBI has established guidelines for banks issuing credit cards, to protect customers when terms change

Do you buy credit cards for rewards and benefits? Many customers are drawn to credit cards for their perks, such as convenience, cashback, and travel access. Yet, recent trends show a growing shift: some banks are reducing or even eliminating these benefits altogether. This move leaves cardholders, who often rely on these advantages, questioning their options. 

 

Why are banks scaling back benefits?

 

"This trend stems from the need to prevent misuse and manage costs more effectively in high-spend categories," says Vinnaayak Mehta, founder of The Infinity Group.

 

He further elaborates, "For instance, banks like ICICI, HDFC, and Yes Bank have recently capped rewards, limited lounge access, and removed benefits on government transactions and other popular spending categories. With these changes, credit cards that once offered substantial perks may now seem less appealing, leaving customers who signed up for those benefits feeling shortchanged."

 

 

So, what does the Reserve Bank of India (RBI) say about changes to credit card terms?

 

What RBI guidelines say on benefit changes

 

The Reserve Bank of India has established guidelines for banks issuing credit cards, to protect customers when terms change. Card-issuing banks must provide adequate notice to cardholders, allowing them time to decide if they want to keep or surrender the card.

 

“The terms may be altered by the bank, but sufficient notice of the change shall be given to the cardholder to enable him to withdraw (the card) if he so chooses,” the RBI stated in its master circular on credit cards.

 

Although the RBI hasn’t specified a precise notice period, it requires that banks clearly communicate the timeframe, giving customers a chance to decide. “A period shall be specified after which time the cardholder would be deemed to have accepted the terms if he had not withdrawn (the card) during the specified period,” the circular noted. Importantly, should the customer find the changes unacceptable, they may surrender the card without facing extra charges.

 

If banks plan to alter any fees apart from interest, they must provide a month’s notice. “Changes in charges (other than interest) may be made only with prospective effect giving notice of at least one month,” according to RBI guidelines.

 

For those who wish to close their accounts in response to altered terms, the RBI directs banks not to impose additional closure fees, provided all dues are settled. “Any request for closure of a credit card has to be honoured immediately by the credit card issuer, subject to full settlement of dues by the cardholder,” it said.

 

How can customers adapt to changing credit card benefits?

 

"For the customers, it means being tactical," advises Siddharth Maurya, founder and managing director of Vibhavangal Anukulakara Private Limited. "It is advisable to routinely compare the offerings of credit cards across various issuers while focusing on those that align with specific needs. Utilising a range of cards can help maximise the most lucrative benefits. If your issuer is cutting back on bonuses, consider switching – many issuers still value loyal customers. And don't overlook features beyond traditional rewards, such as purchase protection or travel insurance, as these may provide more long-term value."

 

Mehta also suggests that those invested in maximising card benefits might benefit from re-evaluating available options. "For those focused on getting the most out of their credit cards, it’s worth reassessing the market for cards that better fit current spending habits and preferences," he adds. 

 

Recent cuts in benefits across major banks

 

Over recent months, numerous credit cards, once promoted for their attractive benefits, have seen downgrades in perks as banks react to rising complaints of misuse. ICICI Bank, HDFC Bank, Yes Bank, and Axis Bank are among the notable banks adjusting reward structures.

 

ICICI Bank recently capped reward points on spending categories such as groceries, utilities, and insurance. Cardholders will no longer earn points on government-related transactions starting November 15. Additionally, high-end cardholders now face stricter conditions, with Rs 75,000 in quarterly spending required to access domestic airport lounges.

 

HDFC Bank introduced limits on reward points across various categories from September 1. For instance, points for utility, telecom, and cable transactions are capped at 2,000 per month across all HDFC credit cards.

 

Yes Bank has adjusted the Marquee credit card’s benefits, requiring higher spending for airport lounge access. Redemption of reward points for flights and hotels is now capped at 70% of the bill. Additionally, rent payments, government spending, and education-related transactions no longer count toward annual fee reversals or milestone perks.

 

In an earlier move this year, Axis Bank cut benefits on travel credit cards, including the Atlas credit card and its co-branded cards like Vistara Infinite and Vistara Platinum. The changes affected both entry-level cards, such as the Flipkart Axis Bank credit card, and premium options like Magnus and Burgundy Private.