AU Small Finance Bank and IDFC First Bank reduce credit card benefits. What's the impact?

AU Small Finance Bank (SFB) and IDFC First Bank have announced significant changes to their credit card offerings, signaling a shift in the landscape of credit card benefits and policies. These changes come amid a broader trend in the industry, with other major players like Axis Bank, Yes Bank, and SBI Card also implementing adjustments to their credit card programs.

Starting with AU Small Finance Bank, they have introduced processing fees for rent payments and education transactions on all their credit cards, except for corporate ones. These changes are set to take effect from May 1st onwards. For rent transactions, a maximum processing fee of 1% or Rs 99 plus GST (whichever is higher) will be applied. This fee will be charged by the 15th of the following calendar month after the transaction. Similarly, a processing fee will also be imposed on education transactions made through third-party applications. However, transactions conducted directly through college/school websites or point of sale machines will be exempt from this fee. It's worth noting that there will be no processing fees on transactions related to international education.

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In response to these changes, Bhavye Goel, the chief editor at TechnoFino, a platform that reviews debit and credit cards, commented, "AU Small Finance Bank seems to have found a good way to curb the rotation of credit, especially in the education category which was being misused a lot recently."

Moving on to IDFC First Bank, they have also introduced several modifications to their credit card terms and benefits. One notable change is the introduction of a surcharge for utility bill payments made with a credit card. A surcharge of 1% plus GST will be applied only when the aggregate of utility bill payments exceeds Rs 20,000. This surcharge will not be applicable to certain credit card variants like the IDFC FIRST Private Credit Card, LIC Classic Credit Card, and LIC Select Credit Card.

Furthermore, IDFC First Bank has increased the charges for rent transactions. Previously, a 1% plus 18% GST charge was levied on rent transactions. However, this has now been raised to a minimum of Rs 249 per transaction or 1% plus 18% GST, whichever is higher.

Additionally, IDFC First Bank has revised its reward points system. The reward points on online spends up to Rs 20,000 in a statement cycle will be reduced to 3X, down from the current 6X. However, the cardholder will continue to earn 10X reward points on incremental spends above Rs 20,000 per month. Furthermore, reward points on education, wallet load, and government services transactions will also be revised to 3X. These transactions will no longer be part of the 10X threshold calculations by the bank.

In terms of airport lounge access, IDFC First Bank now requires cardholders to spend at least Rs 20,000 in a calendar month to be eligible for access the following month.

Ankur Mittal, co-founder and chief technology officer of Card Insider, a platform that tracks the credit card business, commented, "All of this will undoubtedly have an impact on IDFC First Bank card users. Many might even consider some of these changes to be righteous as the bank is curbing business/commercial spending." 

These changes reflect a broader industry trend of banks reassessing their credit card offerings to enhance profitability and mitigate risks. While some changes may inconvenience cardholders, they aim to ensure the long-term sustainability and profitability of credit card operations for the banks involved.

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