AU Small Finance Bank, IDFC First Bank slash benefits on credit cards. What does it mean?

AU Small Finance Bank (SFB) and IDFC First Bank have announced a reduction in benefits on their credit cards. In doing so, both lenders are taking a cue from other big card issuers, including Axis Bank, Yes Bank and SBI Card.

AU SFB has introduced processing fees for rent payments and education transactions. The charges will be applicable on all AU credit cards except corporate ones.

IDFC First Bank has updated its terms for utility and rent payments made through its credit cards, introduced higher spend-based criteria for airport lounge access, and reduced rewards and offers on its cards. The changes will be applicable on all IDFC First Bank credit cards barring a select few.

The changes will be effective from May 1 on both banks' cards.

Rent pain goes up

AU SFB has introduced a maximum processing fee of 1 percent or Rs 99 plus GST or goods and services tax (whichever is higher) on rent transactions using its credit cards.

The processing fee for rent transactions for any calendar month will be charged by the 15th of the next calendar month. For instance, charges for rent paid in May will be made payable before June 15.

Learning curve

The AU SFB has introduced a similar processing fee (of rent) on education transactions. Such payments using the credit card on third-party applications such as but not limited to CRED, PhonePe, Paytm, MobiKwik, Freecharge, etc., will carry a processing fee.

However, transactions done directly through college/school websites or point of sale machines at their premises will not be charged. Also, there will be no processing fees on transactions relating to international education.

As in the case of education, the processing fee for the transaction will be charged before the 15th of the next calendar month following the transaction.

Bhavye Goel, chief editor at TechnoFino, a platform that reviews debit and credit cards, says, “AU Small Finance Bank seems to have found a good way to curb the rotation of credit especially in the education category which was being misused a lot recently.”

Home truths

IDFC First Bank meanwhile has announced that it will levy a surcharge of 1 percent plus GST only when the aggregate of utility bill payments made with a credit card crosses Rs 20,000. So, if your aggregate utility bill (gas, electricity and internet) amounts to Rs 20,000 or less in a statement cycle, there is no surcharge. But if they exceed this limit, then a 1 percent surcharge plus 18 percent GST on the surcharge will be applicable.

The utility surcharge is not applicable on IDFC FIRST Private Credit Card, LIC Classic Credit Card and LIC Select Credit Card.

Harder to lease

While IDFC Fist did levy a 1 percent plus 18 percent GST charge on rent transactions, the bank has now hiked this to a minimum Rs 249 per transaction or 1 percent plus 18 percent GST, whichever is higher.

Other curbs

The bank has also revised its reward points system. The reward points on online spends up to Rs 20,000 in a statement cycle will be revised to 3X effective May 1; at present it is 6X. The cardholder will continue to earn 10X reward points on incremental spends above Rs 20,000 per month. The reward points on education, wallet load, and government services transactions will be revised to 3X. These transactions will no longer be part of the 10X threshold calculations by the bank.

In the buy one and get one free movie offer, the discount per ticket will be revised up to Rs 125 off twice a month.

Moreover, you now need to spend at least Rs 20,000 a calendar month to be able to avail of airport lounge access the following month.

“All of this will undoubtedly have an impact on IDFC First Bank card users. Many might even consider some of these changes to be righteous as the bank is curbing business/commercial spending,” says Ankur Mittal, co-founder and chief technology officer of Card Insider, a platform that tracks the credit cards business.