Credit card devaluation – what banks give, they can take away too | Simply Save

In this backdrop, Maulik of Moneycontrol speaks with Kashif Ansari, an Assistant Professor of Finance at O. P. Jindal Global University on credit card devaluation. Ansari answers questions on whether credit card devaluations have happened before, do banks inform their customers when they make any such changes, and do the revised benefits apply to both existing and new card holders.

Here are a few important points that he highlighted.

1. Almost all banks devalue their credit cards after a certain period of time. What matters is how steep that devaluation (reduction in or removal of card benefits) is.
2. Initially, a bank gives rewards as an incentive for signing up for its credit cards. With time, as a bank crosses its targeted expenditure meant for rewards on a particular credit card, it considers devaluation because it cannot take back the credit cards issued to its customers.
3. Do banks inform customers about credit card changes – RBI rules mandate that banks inform their customers 30 days in advance about any changes in the term and conditions (T&C) or most important terms and conditions (MITC) of a credit card. The MITC mentions things such as credit card joining fee, annual fee, interest charges, cash withdrawal charges, reward points earning rate etc.

4. But generally banks don’t mention everything related to a credit card in the card T&C or MITC. For changes in anything that is not mentioned in the MITC, a bank is not mandated to inform its customers.

5. For example, a bank may mention in the MITC that a credit card holder is entitled to get a voucher if he/ she crosses a certain spending limit. But it may not mention the various voucher options available. For example, a bank may offer Amazon vouchers to its credit card customers (who own a specific card offered by the bank) to start with, but may later remove this from its list of vouchers. It will not have to inform its customers about this change.

6. Any credit card-related changes once they take effect, apply both to existing and new credit card holders.

7. If you have already paid the credit card fees for the year and you would like to give up your credit card once it is devalued, there is no option of any fee refund.

8. What are your options if a bank devalues a credit card – nothing except that you can choose to have 4-5 cards and if one of them is devalued, you can shift your spends to another one. “In India, if you want to optimize your spends by 90-95 percent, four to five credit cards will suffice,” says Ansari.