The Golden Age Is Fading
For years, the Indian credit card market has been a fiercely competitive space where banks lured customers with an ever-growing list of enticing benefits. Complimentary flights, hotel vouchers, unlimited airport lounge access, and significant cashback
on daily spends became standard expectations. This golden age of rewards made strategic spending feel like a rewarding game. But a subtle yet significant shift is now underway. Across the board, major card issuers in India have begun to prune these benefits, a process the industry calls 'recalibration'. This isn't a temporary adjustment but a structural trend, affecting everything from entry-level cards to premium offerings. The changes are often rolled out quietly, buried in updated terms and conditions, leaving cardholders to discover them only when a perk they relied on suddenly vanishes.
Why Banks Are Rethinking Rewards
The cutbacks are not arbitrary; they are driven by a confluence of economic and regulatory pressures. Firstly, the cost of providing these benefits has surged. As more customers used perks like lounge access, the bill for banks skyrocketed. Congestion at airport lounges, which have not expanded as fast as passenger traffic, has also made the perk more expensive for banks to provide. Secondly, the Reserve Bank of India (RBI) has been tightening its oversight. New directives aimed at responsible lending have forced banks to set aside more capital for unsecured loans, including credit card balances, squeezing profitability. This has led banks to question the sustainability of their most generous reward programs. Finally, rising credit card delinquencies and a recent softening in overall spending have made banks more cautious, prompting them to focus rewards on high-spending customers while reducing benefits for the rest.
The Most Vulnerable Perks
Airport lounge access, once a hallmark of even basic credit cards, has been the most prominent casualty. Many banks, including HDFC, ICICI, and Axis, have replaced unlimited complimentary visits with strict quarterly caps. Access is now frequently tied to minimum spending requirements, such as needing to spend ₹35,000 to ₹60,000 in a preceding quarter to unlock the benefit. Reward points and cashback schemes are also being diluted. Banks are lowering cashback caps and reducing the earn rate on previously lucrative categories like utility bills and fuel. American Express, for example, significantly increased the annual spending required to earn milestone travel vouchers, while SBI Card reduced its monthly cashback limit. Co-branded cards have also been hit hard, with some issuers like Axis Bank removing popular airline and hotel partners from their rewards programs.
How to Adapt and Protect Your Value
In this new landscape, being a passive cardholder is no longer an option. The first step is to conduct a thorough audit of your wallet. Read the latest terms and conditions for each of your cards—often sent via email or available in the banking app—to understand precisely what has changed. Don't assume the benefits you signed up for are still in effect. Secondly, be strategic about using your accumulated reward points. Hoarding points is risky, as their value can be diluted overnight. If you have a specific redemption in mind, like a flight or a hotel stay, it's often better to book it sooner rather than later. Some banks have also introduced caps on how many points you can redeem each month, making it harder to use large balances. Finally, align your spending with the card that offers the best return for specific categories. If one card still offers a decent multiplier on groceries, use it exclusively for that purpose. For many, the best strategy may now involve consolidating spending onto one or two primary cards to meet the higher thresholds required to unlock top-tier benefits.
The Future of Card Rewards
Credit card rewards are not disappearing, but they are evolving into a truer form of loyalty program: the more value you bring to the bank, the more you get in return. We are likely to see a greater split in the market. Premium cards will continue to offer strong, curated benefits, but they will be protected by high annual fees or steep spending and relationship value requirements. For the mass market, cards will likely offer simpler, more modest rewards, with a focus on basic cashback or merchant-funded discounts. The future may also lie in personalization, with banks using AI to offer dynamic rewards tailored to individual spending habits. Instead of broad-based perks, you might receive targeted offers from merchants you frequently visit, making the rewards more relevant, if less spectacular.
