Credit card rewards have long been one of the key reasons people choose a particular card, often making everyday spending feel more valuable. According to RBI data, by mid-2025, more than 11 crore active credit cards were in circulation, reflecting steady growth in digital payments. At the same time, credit card spending has continued to rise, with annual card transactions crossing Rs 20 lakh crore in value in recent years, based on RBI payment system statistics.
However, many banks have recently started revising these benefits. All spending categories no longer earn points, and redemption rules have become stricter. These changes reflect shifts in the credit card industry and may influence how you use your card going forward.
Why banks are changing reward programmes
Rewards are funded through interchange and merchant fees earned when you use your card. However, rising operational costs and changing payment habits have prompted banks to reassess these benefits. With the growing use of digital payments such as UPI, credit card spending patterns are also shifting. As a result, many banks are reducing cashback rates, introducing caps, or limiting reward categories, making reward programmes more selective than before.
Card usage is rising, but issuance has slowed
India’s credit card market continues to grow, however, the pace of new card issuance has slowed in recent months. According to RBI data, credit card outstanding balances in India crossed Rs 2.9 lakh crore in 2025, reflecting strong growth in unsecured borrowing. Regulators flagged this rapid expansion as a potential risk if not monitored carefully.
Nowadays banks are becoming more cautious in approving new cards, focusing more on credit quality and responsible lending. Instead of rapid expansion, banks are prioritising customers with stable income and strong repayment histories. As a consumer, this means stricter approval processes.
Rewards are now more category-focused
Another noticeable trend is the shift toward category-based rewards. Instead of offering the same reward rate across all spending, many cards now offer higher benefits only on specific categories. For instance, you may earn higher rewards for travel bookings, online shopping, or dining. At the same time, transactions such as rent payments, wallet loads, or government payments may earn fewer or no rewards. This approach allows banks to control costs while encouraging spending in areas where they want to drive usage.
Evolving redemption rules
You may also notice changes in how reward points can be redeemed. In some cases, the minimum number of points required for redemption has increased. Some reward points may also expire faster than before. Banks are also encouraging you to redeem rewards through their own platforms. This could include travel portals, partner brands, or curated merchant offers. While rewards are still available, they may require more attention to ensure you get full value.
What you should keep in mind
These changes mean you may need to pay closer attention to how your credit card rewards work. Simply using the card for all purchases may no longer offer similar rewards. Choosing a card that matches your spending habits, such as travel or online shopping, can help maximise benefits. At the same time, paying your bills on time and using credit responsibly remain far more important than rewards.
Credit card rewards are gradually evolving as banks adjust to changing payment trends and rising costs. While rewards are not disappearing, they are becoming more targeted and structured. For you as a consumer, understanding how your card works and aligning it with your spending habits can help you continue getting value from it, even as the rewards landscape changes.
(The author is Associate Analyst, Communications, BankBazaar.com. This article has been published as part of a special arrangement with BankBazaar)
