Devaluations are normal. So, why is it hurting Axis credit card holders?

Ranga is angry because he had upgraded to Burgundy membership, the premium banking programme of Axis Bank, in August last year to continue getting air miles and hotel loyalty transfer rewards benefit on Magnus cards that was offered exclusively to Burgundy members.

“When Axis Bank announced the devaluation of Magnus last year in August, my wife and I had more than 800,000 Edge Rewards (Axis Bank’s reward points). We both upgraded to Burgundy accounts by opening fixed deposits (FDs) with the bank as we wanted to use our points efficiently. The bank also promised other additional benefits to Burgundy members, but most of those have been taken away just six months later," said Ranga.

“The last two devaluations have not only reduced the value of our points, we also feel cheated, and that too by one of the large banks," he adds.

As a result, Ranga has decided to move his FDs upon maturity to another bank . “I will move the majority of my business from Axis Bank. If they can pull this off with one product, they can do so with other products too," he said.

Ranga echoes the sentiment of many users of Axis Bank credit cards after the lender announced a host of devaluations on all its credit cards this week.

To be sure, devaluations of cards are legal and normal; all banks downgrade features on credit cards over time. So, why is it hurting Axis Bank cardholders?

Experts say the manner in which Axis Bank has downgraded the cards over the past six months has left users disgruntled.

“The bank promoted Burgundy with superlative rewards and must have managed to get good business as Burgundy banking needs users to have a ₹30 lakh in total relationship value or ₹10 lakh as average quarterly balance in their accounts. But to treat the Burgundy clients at par with non-Burgundy ones and to remove a lot of the benefits within three to four months is absurd," said Tejas Ghongadi, co-founder, The Points Code, a platform that advises credit card users on how to optimize reward points.

Starting 20 April, Magnus Burgundy users will no longer get ‘buy-one-get-one tickets’ on bookmyshow—a movie ticket booking app, while concierge services are discontinued and spend categories of insurance, fuel and gold will neither earn rewards nor be counted for the annual spending threshold. Magnus card will be treated on a par with other non premium cards of Axis Bank. Besides, its airport ‘meet and greet’ services have been reduced to four from the current eight.

Sumanta Mandal, founder, Technofino, a digital platform that reviews credit cards and other banking products, said the bank’s fickleness is damaging for both the customers as well as the bank. “The rewards Axis bank was doling out on its premium cards were unsustainable to begin with so the devaluations were due. But, the bank keeps downgrading its cards once every two months and this has made Magnus and Reserve cards absolutely worthless. It’s unfair for the users as they have paid fees for certain rewards and benefits, most of which are gone in a very short span," he said.

Abbas Zaidi, 28, is another victim of this devaluation. He paid a fee of ₹59,000 (including 18% goods and service tax) to renew his Axis Reserve credit card just three weeks before the recent downgrades were announced. He even had a plan to recover the fee on the ultra premium card: The 50,000 Edge Rewards given as annual benefit would have translated into about ₹22,000 worth of hotel loyalty points, four airport transfers would have saved him about ₹8,000 and the rest was be recovered through the rewards on regular spends. But, the plan has now fallen flat. “I won’t take any airport transfers in the coming month, so those will go to waste. Further, with the transfer partners grouped and caps introduced on them, I’m not eager to spend through the card to accumulate reward points," said the Delhi-based entrepreneur.

One Magnus card user, who did not want to be identified, said he had renewed the card just three days before the bank announced the devaluations. “I did not want to renew it but the bank’s salesperson persuaded me to renew it as it offered lounge access, airport meet and greet services and free movie tickets every month. Just three days later, all three benefits were revoked. To make a customer pay ₹11,000 fee on the pretext of certain features and discontinue them a few days later constitutes fraud, as far as I am concerned," the cardholder said. He could not get the fee reimbursed as he had used the card to make a payment soon after its renewal.

Sanjeev Moghe, president and head, cards and payments, Axis Bank, said “We decided on the changes consciously, after much deliberation. While some benefits are removed, we have not changed the core value proposition of the cards, i.e. reward rate and transfer ratio on redemption partners."

On being asked whether the bank’s sales teams are not informed of such changes in advance so that the cards are stopped from being sold immediately before any downgrades, Moghe said it was key to keep this confidential, hence it was not done days in advance. However, the entire team was trained just before the communication to customers was sent out, he claimed.

Why Axis did what it did

It’s the credit card issuer’s prerogative to make changes to a card’s offerings as it deems fit. The devaluation of a card by way of downgrading of its features is a regular practice as high rewards are an expensive proposition for the lenders. In the case of Axis Bank, until seven months back, the lender was offering as much as ₹50,000 worth of monthly milestone benefits on every ₹1 lakh spent using Magnus.

“No other bank has ever offered such rewards. What a card user would gain in five years from other banks, Axis Bank gave the same value in one year," said Ghongadi, adding that the changes being announced seem like knee-jerk reactions from the bank to contain losses.

A banking expert, who did not wish to be named, said the main problem with Axis Bank pertains to its purchase of air miles from airlines at expensive rates. “Where the typical buying rate is about 30-50 paisa per mile, Axis Bank buys them at almost ₹1 per mile through an intermediary. Of course, the bank will bleed. Till it doesn’t fix this, no degree of downgrades on cards will help," he said. Mint, however, could not independently verify this.

The common thread among devaluations across most credit card issuers is restrictions on airport lounge access.

According to Axis’s new rules, its credit card holders will only be able to access domestic airport lounges if they spend ₹50,000 over the previous three months. Earlier, lounge access was complimentary in certain cards, irrespective of the spends. A single lounge visit would cost users a mere ₹2 using these cards and this amount, too, was refunded in many cases.

An official who works in Axis Bank’s cards division told Mint that one of the main reasons for this devaluation was the increased use of lounge access by cardholders. “Airport lounges are quite crowded these days. Earlier, we had maybe 20-30% of all holders using their cards for access. Now this number is easily double that post the pandemic," the official said on condition of anonymity.

The official, however, could not provide exact numbers on how many Axis Bank credit card holders used lounge access. “We buy these (lounge visits from airline partners) in bulk, based on the number of eligible cardholders and the trends of previous years. But that trend has gone up massively since 2021. Between the payments to the lounge and the [card] network, it’s a loss-making feature for us," he added.

To be sure, other banks have also cut down on lounge offerings on their cards. HDFC Bank revised lounge visits on its Regalia and Millennia cards in December 2023 to allow only up to two lounge visits each per quarter on a minimum spend of ₹1 lakh.

An email sent to HDFC Bank about this did not elicit any response.

What should cardholders do?

The revised Axis Bank rules will come into effect from 20 April, giving customers one month to decide on how to maximize their rewards.

One of the key changes is the grouping of airline and hotel transfer partners (into group A and B partners) and a cap on maximum rewards that can be transferred under each group. For instance, on Axis Reserve and Magnus, users can transfer up to 100,000 edge reward points to group A partners and up to 400,000 points to group B partners in a year. For Magnus Burgundy, it is 200,000 and 800,000 edge reward points , respectively.

Mandal says the catch here is that the redemption partners (airlines or hotel groups) used more frequently or offering better value, such as Accor Hotels, Marriott International, Qatar Airways, United Airlines and Singapore Airlines, among others, are all categorized in group A with a lower capping. “I would strongly advise cardholders to transfer their existing rewards to the redemption partner of their choice before this classification kicks in," he said.

Do note that edge reward points of up to 200,000 redeemed in group A can not fulfil a family’s free holiday plans. “At best, a couple can get business class tickets to a foreign destination or stay in a luxury hotel. It would be difficult to get both with about 100,000 points," said Mandal.

Ghongadi agreed and said even 200,000 points are not enough to plan free flight tickets and hotel stay for a family of four.

As to whether it makes sense to continue using the cards, experts say that without the key spend categories such as insurance and utility payments, it would be difficult to achieve the annual fee waiver milestones and accumulate meaningful rewards. Do note that Axis Bank has also restricted rewards on purchase of gold jewellery and fuel on all its cards.

Axis Reserve card, say most financial experts, is no longer worth the fee.

“At such a high fee, if most regular spends don’t earn rewards, how is it any different from a lifetime free cashback card? With the removal of airport transfer benefits, paying about ₹60,000 fee on Reserve card is not worthwhile," said Mandal.

However, the Axis Atlas card, even after the recent downgrades, is still a valuable travel card at its current fee of ₹5,000. One can earn accelerated rewards on monthly spends of up to ₹2 lakh on air tickets and hotel bookings, which is a decent threshold as many people won’t spend beyond that in a month. However, now, a maximum of 150,000 edge miles can be transferred in a year, out of which only 30,000 edge miles are allowed in group A, while the rest 120,000 can be transferred to group B. One edge mile is valued at ₹1.

The bottom line of the recent devaluations is that users should pare down their expectations of multiple free holidays earned with credit card rewards every year. Ghongadi said before Axis Bank’s exceptionally rewarding cards, the norm was one free family holiday per year with credit card points, which is what users can expect, going forward.