According to RBI guidelines, if a bank wishes to make changes to a credit card’s benefits or terms and conditions, the issuer must provide a one-month advance notice to all customers of the specific product. If a customer doesn’t respond, the bank may consider this as consent to continue using the product under the new terms. However, the guidelines do not clarify what happens if a customer does not wish to continue with the credit card after these changes. Whether the customer would receive any refund is also not specified by the RBI.
Recently, we've seen several card issuers launch credit cards with highly attractive benefits, only to reduce their value after gaining a significant customer base within a few months. For example, the ICICI Bank Emeralde Private Metal Credit Card initially offered 1 reward point = Rs. 1 for Amazon Pay and some other gift voucher redemptions. However, just a month after the card’s launch, this was reduced to 1 reward point = Rs. 0.50 for Amazon Pay and similar vouchers.
Similarly, the Yes Bank Marquee Credit Card was recently devalued, with a higher spend threshold now required for complimentary airport lounge access. Additionally, reward point redemption for flights and hotel bookings is now capped at a maximum of 70% of the booking amount.
I don’t have an issue with devaluation itself; it’s ultimately the bank's decision. However, what about customers who have already paid a joining or annual fee, typically charged for a full 12 months, only to see their card’s benefits reduced partway through the year? If customers are paying for a full year, why should banks reduce benefits midway?
Banks often include clauses in their terms and conditions stating that they can change benefits anytime, even without notice. But this is exactly where the Reserve Bank of India (RBI) should step in. The RBI exists to protect customer interests, and it should ensure that card issuers don’t devalue a product mid-term for existing customers who have already paid their fees.
Possible Solutions:
I believe there are two solid solutions to address this issue:
These two solutions seem very practical and could effectively protect customer interests. If regulators don’t take such steps, or similar necessary measures, card issuers may continue this practice unchecked, ultimately causing customers to suffer. Imagine this scenario: a card issuer launches a credit card with an enticing 5% unlimited cashback and an annual fee of Rs. 10,000. Hundreds of thousands of customers pay Rs. 10,000 for the card, only to find, after just two months, that the card terms have changed to offer only 5% cashback capped at Rs. 1,000 per month, with additional restrictions like no cashback on utilities, insurance, wallets, or rent payments. Then what?
Recently, we've seen several card issuers launch credit cards with highly attractive benefits, only to reduce their value after gaining a significant customer base within a few months. For example, the ICICI Bank Emeralde Private Metal Credit Card initially offered 1 reward point = Rs. 1 for Amazon Pay and some other gift voucher redemptions. However, just a month after the card’s launch, this was reduced to 1 reward point = Rs. 0.50 for Amazon Pay and similar vouchers.
Similarly, the Yes Bank Marquee Credit Card was recently devalued, with a higher spend threshold now required for complimentary airport lounge access. Additionally, reward point redemption for flights and hotel bookings is now capped at a maximum of 70% of the booking amount.
I don’t have an issue with devaluation itself; it’s ultimately the bank's decision. However, what about customers who have already paid a joining or annual fee, typically charged for a full 12 months, only to see their card’s benefits reduced partway through the year? If customers are paying for a full year, why should banks reduce benefits midway?
Banks often include clauses in their terms and conditions stating that they can change benefits anytime, even without notice. But this is exactly where the Reserve Bank of India (RBI) should step in. The RBI exists to protect customer interests, and it should ensure that card issuers don’t devalue a product mid-term for existing customers who have already paid their fees.
Possible Solutions:
I believe there are two solid solutions to address this issue:
- Delayed Implementation Based on Renewal Dates: When a bank announces product changes, these changes should only take effect upon the cardholder’s renewal date. This way, each existing customer can enjoy the original benefits until their renewal and then decide if they want to pay the renewal fee for the card with updated benefits. This would mean that the changes would take effect at different times for different customers, depending on their specific renewal dates, which could be challenging for card issuers to manage.
Example: Person A holds a card with a renewal date in 7 months, while Person B has the same card but with a renewal in 4 months. If the card issuer announces benefit changes, Person A would continue receiving the original benefits until their renewal date in 7 months, while for Person B, the changes would take effect in 4 months when their renewal comes due.
- Pro-Rated Refund of Annual Fees: Card issuers could offer a pro-rated refund of the annual fee if a customer chooses to discontinue the card due to benefit changes. For instance, if a cardholder has paid the annual fee and used the card for only 3 months, with 9 months remaining until renewal, and the bank announces a devaluation, the customer should have the option to cancel the card and receive a refund for the unused 9 months.
These two solutions seem very practical and could effectively protect customer interests. If regulators don’t take such steps, or similar necessary measures, card issuers may continue this practice unchecked, ultimately causing customers to suffer. Imagine this scenario: a card issuer launches a credit card with an enticing 5% unlimited cashback and an annual fee of Rs. 10,000. Hundreds of thousands of customers pay Rs. 10,000 for the card, only to find, after just two months, that the card terms have changed to offer only 5% cashback capped at Rs. 1,000 per month, with additional restrictions like no cashback on utilities, insurance, wallets, or rent payments. Then what?
