Come April 1, lenders HDFC Bank, SBI Card, ICICI Bank and Axis Bank who control nearly 90% of the 117.7 million active credit cards market have announced restricted reward points accruals, as part of their efforts to rationalise redemptions by linking it to spend-linked benefits
The banks aim to ensure better operational efficiencies and profitability after the recent surge in delinquencies in the segment. Credit card rewards have long been one of the key reasons why people would choose a particular card, often making everyday spending feel more valuable. But many banks have revised these benefits now. All spending categories no longer earn points, and redemption rules have become stricter. These changes reflect shifts in the credit card industry and may influence how you use your card, going forward.
Most issuers have also capped redemption at 60,000 points a month from unlimited earlier, apart from limiting cashbacks, increasing fees on utility/wallet transactions, and tightening lounge access norms based on higher minimum spending thresholds, among others.
This means that spending more to earn more rewards points will not help you any longer, especially if you are holding premium cards. Banks will charge you if you are paying utility bills with your credit cards beyond a threshold or if you are paying transport fees or tolls if the amount exceeds `75,000 for premium cards or `50,000 for other cards. Another change is in calculating reward points for redemptions which has been hiked across the board to the multiples of 4,000 now from 1,000 earlier.
Another noticeable trend is the shift towards category-based rewards. Instead of offering the same reward rate across all spending, many cards now offer higher benefits only on specific categories. You may earn higher rewards for travel bookings, online shopping, or dining but you will earn less or nil if the payment is for rent, wallet loading, or government payments. According to industry experts, these changing trends signal increased focus on profitability and cost optimisation.
This comes amid rising delinquencies in recent quarters and decline in overall monthly spends, which in February dipped 11% to `1.8 trillion from `1.99 trillion in January, and over `2 trillion each in the previous three months. Despite declining spends, overall card additions rose 21% to 117.7 million from the past six months trend of net card additions remaining muted.
However, on an annualised basis, spending rose 6% from Rs 1.68 trillion, according to Reserve Bank data. Similarly, transaction volume also declined 8.6% from January but grew 24% year-on-year. According to RBI, annual spends through credit cards have been topping the Rs 20-trillion-mark for the past many years.
Issuing banks normally fund rewards through interchange and merchant fees. However, rising operational cost and changing payment habits have prompted them to reassess these benefits. As a result, many are reducing cashback rates, introducing caps, or limiting reward categories, making reward programmes more selective now. Banks are also more cautious in approving new cards, focusing more on credit quality and responsible lending.
To pithily put it, rewards are not disappearing but are becoming more targeted and structured. As a customer, understanding how your card works and aligning it with your spending habits can help you get better value.