Credit cards have been increasingly reducing benefits and in certain cases have been withdrawing them totally in a bid to curb wrong usage. But what options does a customer, who takes a credit card solely for its benefits, have when they are withdrawn suddenly?
Card issuing banks have to give sufficient notice to customers about such changes, according to RBI (Reserve Bank of India) guidelines. “The terms may be altered by the bank, but sufficient notice of the change shall be given to the cardholder to enable him to withdraw (the card) if he so chooses,” according to RBI’s master circular on credit cards.
Though RBI has not specified the duration, it said that the card issuing bank should clearly state the timeframe available to the customer to make a decision. If the customer does not intimate his decision within the stipulated time, she/he is deemed to have accepted the changes made by the card issuing bank.
“A period shall be specified after which time the cardholder would be deemed to have accepted the terms if he had not withdrawn (the card) during the specified period,” RBI said. And if the customer wants, she/he can surrender the card if it turns out to be disadvantageous, it said.
If the card issuing bank wants to make changes in charges other than interest, one month’s notice should be given. “Changes in charges (other than interest) may be made only with prospective effect giving notice of at least one month,” RBI said.
Several credit cards, which were launched with attractive benefits, have seen downgrades in recent months following complaints about misuse. ICICI Bank recently reduced the benefits for customers across its credit cards.
The bank capped reward points for spending on grocery, utility payments and insurance purchases. There will be no reward points on government-related spending on ICICI credit cards. The changes will come into effect from November 15. ICICI Bank has also discontinued spa access for high-end cards and has made spending of ₹75000 every quarter mandatory for lounge access at domestic airports.
HDFC Bank had earlier announced that it is capping reward points for several popular categories across cards. It fixed reward points on utility spends and telecom and cable transactions at 2000 per month across all its credit cards. HDFC’s cap on reward points came into effect from September 1.
Similarly, the Yes Bank Marquee credit card was also devalued recently. A higher spending threshold is now required for airport lounge access. The redemption of reward points for flight and hotel bookings has been capped at 70% of the billing amount. Rent payments, government-related spending and education payments have been excluded from spend thresholds for annual fee reversal and milestone benefits in several leading credit cards.
But will the customer be charged if she/he surrenders the card due to the change in benefits or charges? Absolutely not. “If a credit card holder desires to surrender his credit card on account of any change in credit card charges to his disadvantage, he may be permitted to do so without the bank levying any extra charge for such closure. Any request for closure of a credit card has to be honoured immediately by the credit card issuer, subject to full settlement of dues by the cardholder,” RBI said.
Allirajan M is a journalist with over two decades of experience. He has worked with several leading media organisations in the country and has been writing on mutual funds for nearly 16 years.
