Why your premium credit card perks just got smaller: The big squeeze on banks

“The bank launches co-branded credit cards or announces accelerated rewards on vouchers of certain brands with the assumption that 20-25% would be spent on those brands, while the rest would be on other regular spends. Similarly, assumptions are made for travel credit cards that allow reward redemption through loyalty programmes. But when a majority of credit cardholders start concentrating spending in high-reward categories or drive up redemptions, the product becomes lopsided,” said Siddharth Mehta, co-founder of Kiwi, a fintech company that issues UPI-based credit cards. “At this point, the bank has to step in and course correct. So, banks are not doing devaluations because they like it, they are just protecting the portfolio when the assumptions break.”