HDFC Bank Restricts Lounge Access On Regalia Cards, What’s The Reason And Will Other Banks Follow Suit?

HDFC Bank has recently made changes to the rules governing its Regalia credit cards. Effective December 1, 2023 access to the lounge program will be determined by the cardholder’s spending patterns. To enjoy lounge benefits, individuals need to spend Rs 1 lakh or more in a calendar quarter, spanning January-March, April-June, July-September, or October-December.

“Effective December 1st, 2023, complimentary lounge access at lounges within and outside India can no longer be availed on Regalia First Card,” the bank said on its website.

The bank has also announced that users can receive two complimentary lounge access vouchers as part of their quarterly milestone.

For cardholders seeking lounge access outside India, they can request a priority pass after completing a minimum of four retail transactions with their HDFC Bank Regalia credit card. This pass enables the cardholder and any additional members to collectively enjoy up to six complimentary lounge access visits per calendar year. It’s important to be aware that surpassing the six complimentary visits will incur a charge of $27 plus Goods and Services Tax (GST) per visit.

Numerous credit card users have voiced their discontent with this decision on social media platforms like X (previously Twitter).

One user expressed drew a parallel to the suspension of free food for HDFC Bank cardholders to the denial of lounge access to the general class on the luxury liner RMS Titanic in 1912, stating, “Credit cards sponsored lounge access for the middle class is about to get over. We are in a recession now.”

Yet another user posted on X: “Brace yourselves for #HDFCBank’s new rule: If you’re a Regalia First or Millennia credit card holder, you must spend Rs 1 lakh per quarter for free lounge access. And guess what? Other banks might follow suit.”

In July 2023, Axis Bank took a step by blocking access to redeem reward points for users engaged in non-personal spending, ensuring the sustainability of its rewards program. Additionally, the bank updated the features of a popular co-branded credit card, the Flipkart Axis Bank Credit Card.

Why Is This Happening?

According to experts, any action of devaluing credit cards is associated with maintaining profitability for the bank. The cost charged by the lounge operators to the banks has gone up.

“Dreamfolks, which is one of the large lounge operators in India, bills a blended cost of Rs 990 to banks for each lounge visit. The costs are higher for international lounges. These costs have risen significantly recently,” says Raj Khosla, founder and managing director of MyMoneyMantra.com, a loan aggregator.

“The lounge access as a feature was being attached to even entry-level cards till recently, however, banks are removing this to control costs. Recently, a few banks have withdrawn the lounge feature from their entry-level credit cards. HDFC Bank has recently, allowed lounge access on its Regalia card on the basis of the expenditure done in the quarter. This is to ensure spending and thus profitability for the bank,” adds Khosla.

Incidentally, rewards devaluation is not a new concept. Banks periodically relook at their rewards program and tweak them in response to ongoing challenges as well as to make them more relevant to users.

“Today, those challenges may be regarding improving margins, adjusting to competition, and countering inflation while satisfying the expectations of their customers. As participants in the premium credit card space increase, banks may need to differentiate their offerings to stay relevant to customer needs, and this can involve adjusting benefits to align with their target customer base,” says Adhil Shetty, CEO of BankBazaar.com.

Will Other Banks Follow Suit?

According to experts, when one major bank takes a significant step, especially in terms of managing rewards programs or implementing changes to credit card features, other banks often take notice of that.

If HDFC Bank’s decision proves to be effective and well-received by customers, it might influence other banks to consider similar measures to enhance the sustainability of their own programs, or adapt to changing trends in the financial industry. The banking sector often observes and responds to each other’s strategies and innovations.

In the near term, customers may see the associated rewards change, and even reduce for a time.

“But over time, when the economic sentiment changes, many of these rewards will either come back or be replaced by others. This is a cyclic process, and we’ll see the cycle change in a few quarters,” says Shetty.

Incidentally, credit card offerings continue to remain dynamic. “The bank has every right to check its profitability with every product and lending category. The access to the lounge as a feature might be restricted to premium cards,” says Khosla.