Credit Card Reduce Rewards – The benefits and rewards on Credit Cards are gradually reduced by the issuers/banks. These cuts in the recent times are due to misuse by some. Over the past few months, many credit card issuers have started excluding important categories such as lounge access, utility bill, insurance, and rent payments from their reward-earning category list.

Why are banks focusing on reducing the benefits on these categories? 

A credit card is a powerful financial tool if used correctly. It gives users to earn a significant amount of cashback, reward points, gift vouchers, and air miles simply by spending on their daily needs. However, a few individuals misuse credit cards on a large scale, prompting banks to exclude certain important categories from their reward-earning lists.

Credit cards, long celebrated for benefits like cashback, lounge access, and travel miles, is undergoing a transformation that may leave cardholders feeling shortchanged. Banks are scaling back on these once-lucrative perks. Several lenders such as HDFC Bank, Axis Bank, ICICI Bank, among others have reduced benefits on their credit cards, including on premium versions.

Lounge Access – Why to reduce rewards ?

The cost for banks per lounge visit two years ago was approximately ₹600 on average. As of second quarter of FY24 (July-September 2024), this cost had surged to ₹990, marking a 60% increase in just 24 months. According to some experts in the banking industry, the costs for lounge access have surged from 0.10% to 0.25% of the product cost, necessitating the adjustments in benefits.

The majority of banks have reduced or restrict the free lounge access. For example HDFC Bank recently announced changes to its lounge access programme for Regalia credit cardholders in India, effective from December 1. Users will need to meet a spending criterion of ₹1 lakh or more in a calendar year to access lounge facilities.

Other banks like IDFC First Bank and ICICI Bank have also introduced minimum spending criteria for airport lounge access.

Also Read –Lowest Credit Card Interest Rate in India – 2023

Utility bill payments – Credit Card Reduce Rewards ?

a. The accelerated reward  point on Utility bill payments are for individuals and for domestic bills but many business owners use their personal credit cards to pay their office utility bills. Paying business utility bills with a personal credit card is not allowed, as per a bank’s terms and conditions.

c. Inter transaction through credit card for vendor payments and misuse the vendor payment option to transfer money via their credit card to the bank accounts of their friends and family members who later transfer the same amount back to this person.

Insurance payments – Why to reduce rewards?

a. There are many insurance agents who use their personal credit cards to pay insurance premiums for their clients.

b. Many people use the credit card to purchase the high-value insurance policies just to meet credit card milestones and earn rewards and later cancel the Insurance policy during the free-look cancellation period and get the money back in their bank account.

Rent payments – Credit Card Reduce Rewards?

This is the most common payment option where the rewards are generated by paying fake rent to family members or friends through online platforms that enable such transactions without a formal rent agreement.

People used such websites/apps to pay fake rent to friends or relatives and earning rewards.