Axis Bank and IDFC set to devalue popular credit cards: what does it mean?

Axis Bank and IDFC First Bank announced devaluation on some of their most popular credit cards. It refers to a process where offers, rewards, and benefits on the credit card decrease over time.

Axis Bank will review and revise benefits on its credit cards starting April 20, while IDFC First will initiate these changes on most of its credit cards starting 1 May, 2024. Banking major like HDFC Bank have already devalued its popular credit card, Regalia.

What is Credit Card devaluation?

Credit card devaluation refers to a decrease in the value of an offering provided by the card issuer over time. This happens when credit card providers scale back on rewards, cashback, perks, offers, and other benefits on the card while users still pay the same annual fees and interest rates. So, in a nutshell, you get less value for the same amount of money you pay for your credit card.

What kind of services might be scaled back?

Benefits and services that are being scaled back majorly include adjustments in the rewards programme. IDFC is introducing changes in the rewards earning rate and the monthly threshold for earning 10X rewards. IDFC will also impose a 1% transaction fee on utility spends exceeding ₹20,000 per month.

While Axis Bank is moving towards a model where access to domestic lounges is linked to spending by the cardholder. Moreover, the company has also excluded jewellery and insurance spending from the list of most of its cards.

Which cards are being devalued?

Why do credit card issuers devalue their cards?

This is a regular practice followed by credit card issuers as providing a high number of benefits and rewards to cardholders is a costly practice and tends to hurt lenders financially. Banks routinely try to adjust these rewards considering the current competition, inflation, company margins, and customer expectations.