Whalesbook
India's credit card market is undergoing significant changes as banks rethink customer benefits, especially airport lounge access. This popular perk is moving from a widespread incentive to attract new customers towards a premium feature linked to how much cardholders spend. The shift is driven by rising operational costs and the need to make reward programs more sustainable. This means cardholders will need to spend more to keep benefits that were once standard.
Lounge Access Becomes a Premium Benefit
The way credit card benefits are offered is evolving. Previously, airport lounge access was a key attraction for new customers. Now, banks are prioritizing spending and engagement, linking these premium services to consistent card use. This adjustment is particularly noticeable for mid-range credit cards, where minimum quarterly spending thresholds have increased, often between Rs 50,000 and Rs 75,000, with some banks setting even higher limits. Banks like HDFC Bank and ICICI Bank are implementing these changes, joined by Axis Bank and SBI Card, reflecting a common industry move to cut costs and focus on high-value customers. The cost per lounge visit, estimated between Rs 200 and Rs 1,000, made the previous model too expensive as passenger numbers hit record highs.
Banks Adjust Tactics for Different Cards
Major players are adopting varied, yet consistent, strategies. SBI Card, for instance, has divided its domestic lounge access into 'Set A' for premium cards and 'Set B' for Prime and Platinum cards, and introduced a small fee for some transactions. HDFC Bank has doubled quarterly spending thresholds on its debit cards and moved to a QR-based e-voucher system to prevent misuse. ICICI Bank's credit card changes include higher foreign transaction fees on select premium products while adding bonus lounge visits for customers meeting new spending levels, incentivizing international spending. Axis Bank has also made significant adjustments, with some cards ending complimentary access or reducing cashback percentages and travel partner benefits.
These shifts affect various card tiers. While ultra-premium cards like the HDFC Infinia and Axis Magnus continue to offer unlimited or extensive lounge access, often via Priority Pass, for a substantial annual fee, mid-tier and entry-level cards face stricter limits or losing benefits entirely. For example, RuPay Platinum debit cards have seen lounge access removed, while RuPay Select debit cards now require approximately Rs 5,000 in quarterly spending for access in the following quarter. Some banks, like Axis Bank with its Airtel Axis Bank Credit Card, have eliminated complimentary lounge access altogether, effective from April 2026.
Market Context: Bank Performance and Reward Strategy
The financial standing and market position of these banks provide a backdrop for these strategic shifts. As of mid-May 2026, HDFC Bank has a market capitalization of approximately Rs 11.81 lakh crore and a P/E ratio of 15.54x. ICICI Bank holds a market cap of around Rs 8.92 lakh crore with a P/E ratio of 16.89x. Axis Bank's market capitalization stands at roughly Rs 3.87 lakh crore with a P/E ratio of 14.81x. SBI Card, a specialized credit card issuer, has a market cap around Rs 60,000 crore and a P/E ratio of approximately 29.7x. These valuations indicate a strong market presence, yet the P/E ratio for SBI Card, being higher, suggests investors expect strong future growth or value its specialized credit card business highly.
The trend of reducing rewards is not limited to lounge access. Banks are also reducing the value of reward points, lowering cashback caps, and changing co-branded card deals. This broader change is partly a response to economic challenges, including rising interest rates and slower growth in credit card spending observed in early 2026. Furthermore, increased credit card processing fees for merchants, which can average around 2-3%, add to the overall costs banks need to manage. Experts like Adhil Shetty of BankBazaar note that linking perks to usage encourages customer engagement, while Santosh Agarwal of Paisabazaar emphasizes optimizing rewards rather than chasing points through unnecessary spending. This fits with the industry view that common, expensive benefits are becoming harder to justify as competition grows and customers become more sophisticated.
Risks for Cardholders and Banks
The tightening of credit card benefits carries built-in risks. For cardholders, the immediate impact is a perceived reduction in value, which could lead to more unhappy customers leaving, especially among those who primarily valued perks like lounge access. The complexity of new spending requirements could also put off customers who spend less carefully, forcing them to re-evaluate the credit cards they use. From a bank's perspective, while cost savings are a primary objective, if changes are handled poorly or seem unfair, it could harm the bank's reputation and customer loyalty. The move also risks upsetting a group of customers if rival banks don't do the same or if new benefits don't seem as good.
Moreover, for banks like Axis Bank, removing popular travel partners without much warning has drawn criticism, highlighting the potential for bad press and customer anger. The closer look at spending habits also means banks must deal with changing customer feelings if economic conditions lead to reduced non-essential spending. The cost of lounge visits itself, coupled with the work needed to manage new eligibility systems, may also not achieve the expected cost savings if usage patterns among the remaining eligible users remain high. Banks must also deal with regulatory oversight, ensuring transparency in policy changes and avoiding practices that could be seen as discriminatory or misleading.
What's Next for Credit Card Rewards
Looking ahead, the credit card industry is likely to continue moving towards more personalized offers and value-driven benefits. Banks will increasingly use data analysis to create custom rewards for specific customer groups, moving beyond one-size-fits-all options. The focus will remain on enhancing the main value of cards – be it through faster rewards on essential spending, good travel insurance, or easy digital features – rather than on costly, widely distributed perks. According to industry trend reports from early 2026, expect further refinement in reward structures, with emphasis on financial discipline and long-term utility over short-term incentives. Banks like HDFC Bank, ICICI Bank, Axis Bank, and SBI Card will likely continue to innovate in this area, seeking a delicate balance between managing costs and keeping customers to maintain their edge in a busy market.