Banks Slash Credit Card Rewards Amid Shrinking Profit Margins

Indian banks are tightening credit card rewards as shrinking profit margins force them to recalibrate benefits. Over the past few weeks, leading issuers such as HDFC Bank, SBI Card, Axis Bank, ICICI Bank, and American Express have announced significant cuts to reward points, cashback offers, and lounge access privileges. This move directly impacts millions of cardholders who have long relied on these perks for travel, shopping, and lifestyle benefits.

The primary reason behind these changes lies in profitability pressures. With more customers repaying balances promptly or shifting to cheaper personal loans, banks are earning less interest income from revolving credit. Rising deposit rates have further increased funding costs, making it difficult to sustain expensive reward programs. Additionally, regulatory changes such as the RBI’s expected credit loss framework have raised capital requirements for unsecured lending, forcing banks to rethink their reward structures.

For customers, the impact is immediate and noticeable. HDFC has capped SmartBuy brand voucher rewards at 3,000 points per month, while lounge access now requires a quarterly spend of ₹60,000. SBI has halved reward caps on PhonePe co‑brand cards and excluded categories like tolls and insurance. Axis has dropped partnerships with Accor, Marriott Bonvoy, and Qatar Airways, diluting travel benefits. ICICI has reduced reward rates on mid‑tier cards, and American Express has tied lounge access to higher spending thresholds. These changes particularly affect “transactor” customers who maximize rewards but pay no interest, making them less profitable for banks.

Cardholders now face tougher choices. To retain value, they must diversify spending across eligible categories, track quarterly thresholds, and carefully review updated terms and conditions. Some may even consider alternatives such as debit cards, fintech wallets, or co‑brand partnerships that offer better value. While ultra‑premium cards still retain certain perks, entry‑level and mid‑tier users are seeing the sharpest cuts.

Banks are slashing credit card rewards to protect margins, leaving customers with fewer perks and stricter conditions. The golden era of easy cashback and unlimited lounge access is fading, replaced by a more cautious, cost‑controlled approach. For consumers, the key lies in adapting strategies, staying informed, and reassessing whether their current cards still deliver the benefits they expect.