If you’ve been paying attention to your credit card statements lately, you might’ve noticed that the reward points you’re earning aren’t stretching as far as they used to. What was once worth 500 rupees toward a flight booking now only covers 350 rupees. The airlines are the same, the spending requirements haven’t changed, but the redemption value has silently shrunk.

This isn’t an isolated incident with one or two cards. It’s happening across the board, from premium travel cards to entry-level cashback offerings. Banks are systematically devaluing their reward programs, and they’re doing it in ways that don’t trigger immediate customer outrage—small tweaks to conversion ratios, subtle changes to partner valuations, new restrictions on redemption categories.

The economics behind these programs have shifted considerably. When credit card volumes were growing at 25-30% annually and merchant discount rates were higher, banks could afford generous reward structures. Now, with the RBI capping MDR rates and competition intensifying, those margins have compressed significantly.

Interchange fees—what banks earn when you swipe your card—haven’t kept pace with the promised rewards. Premium cards that offer 4-5 reward points per 100 rupees spent were predicated on assumptions about customer spending behavior that didn’t quite pan out. People gamed the system more effectively than banks anticipated, concentrating their spend on high-reward categories and avoiding those that offered minimal benefits.

The data’s clear when you look at redemption patterns. A significant portion of cardholders never redeem their points at all, which is actually profitable for banks—they get the customer loyalty benefit without the cost. But the subset that actively optimizes their redemption is costing banks far more than projected.

Airlines and hotel partnerships are another pressure point. These programs used to be genuinely symbiotic—banks got valuable redemption options, and partners got customer traffic. But as travel demand normalized post-pandemic, partners started demanding better terms. The conversion rates that banks can negotiate have worsened, which gets passed directly to cardholders.

Some banks are also dealing with regulatory overhead around these programs. There’s increasing scrutiny on how reward points are accounted for, how liabilities are calculated, and whether the programs are being marketed transparently. Compliance costs have risen, which makes maintaining generous programs less attractive.

What’s interesting is how banks are handling the communication. Rather than announcing sweeping changes that might prompt customers to cancel cards, they’re making incremental adjustments every few months. A partner devaluation here, a category restriction there—nothing dramatic enough to generate headlines, but cumulatively significant.

Premium cardholders with high annual fees are feeling this most acutely. When you’re paying 15,000-20,000 rupees annually, you’re calculating whether the benefits justify the cost. If reward values drop by 20-30%, that calculation changes quickly. Some banks are seeing increased premium card cancellations as a result.

The shift toward cashback programs is telling. Cashback is simpler, more transparent, and doesn’t require the same complex partnership structures. For banks, it’s easier to manage the economics—they know exactly what each rupee of cashback costs. For customers, the value proposition is clearer, even if the absolute benefit might be lower.

Foreign banks operating in India are handling this differently than domestic players. They’ve historically maintained more stable reward structures, partly because their customer base is smaller and more affluent. But even they’re not immune—several have quietly adjusted transfer ratios to airline partners over the past quarter.

If you’re holding multiple credit cards primarily for rewards optimization, it’s worth auditing whether the effort still makes sense. The golden age of card churning and maximum reward extraction is fading. The arbitrage opportunities that existed two years ago have largely closed.

For most people, the practical advice is probably to focus on one or two cards that align well with actual spending patterns, rather than trying to maximize every category. The complexity tax of managing multiple cards and tracking constantly changing reward structures might not be worth it anymore.

Banks aren’t going to reverse course on this. If anything, the pressure to rationalize these programs will intensify as digital payment volumes continue growing and fee income remains constrained. The reward programs that survive will likely be more modest but more sustainable—which is probably better for everyone in the long run, even if it feels like we’re losing something valuable right now.