Title: Changes Ahead: Lounge Access Benefits on Premium Credit Cards to be Restricted
Subtitle: As banks look for ways to reduce costs and cater to high-spending customers, free lounge access at airports may soon become a thing of the past for credit cardholders.
Providing free lounge access at airports has long been a popular benefit offered by premium credit cards. However, according to a 2022 report by Collinsons, a travel insurance firm, 87% of Indians expect airport lounge access as a benefit from a premium credit card. As a result, banks have been footing the bill for these access fees, impacting their profit margins.
To address the rising costs and counter inflation, credit card rewards are being rationalized. Banks are now considering restricting or making changes to the lounge access benefits tied to premium credit cards, with the aim of improving their margins and remaining competitive in the market.
HDFC Regalia credit cards have recently made modifications to their lounge access program. Cardholders will now need to spend a minimum of ₹1 lakh or more in a single quarter to qualify for the lounge benefits. This change ensures that only high-spending customers can enjoy these exclusive privileges.
The process for availing these perks has also been modified. Once the spending threshold is met, cardholders must visit the Regalia SmartBuy page and the lounge benefits section on the bank’s website to generate a lounge access voucher, which can then be redeemed.
“Given the high-interest rate and high demand, credit card rewards are being rationalized with a view to improve margins and counter inflation. At the same time, banks are differentiating their offerings to stay relevant and adjusting benefits to align with their target customer base,” says Adhil Shetty, CEO of BankBazaar, a financial services marketplace.
With the growing number of players in the premium credit card sector, banks recognize the need to distinguish their services to align with customer preferences. This may entail adapting the benefits to cater to their intended clientele. In the short term, customers may witness alterations in the rewards linked to these cards, resulting in reduced offerings.
However, Adhil Shetty believes that the cycle will change in a few quarters, stating, “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.”
Providing free lounge access to all cardholders can be costly for banks, as they have to pay fees to airport lounge networks. By restricting this benefit to high-spending customers, banks can manage costs effectively and allocate resources more efficiently.
Moreover, offering exclusive lounge access to high spenders significantly enhances the perceived value of premium credit cards. This not only incentivizes customers to use these cards more frequently but also contributes to the card issuer’s revenue.
Practical considerations come into play as well, as airport lounges have limited capacity. Granting access to all cardholders, regardless of their spending habits, can lead to overcrowded lounges, compromising the quality of the experience. Prioritizing high spenders ensures a more comfortable and enjoyable lounge environment for all users.
In conclusion, changes are on the horizon for the lounge access benefits offered by premium credit cards. Banks are reassessing their rewards programs, with a focus on reducing costs and catering to high-spending customers. While the immediate result may be a restriction of these benefits to those who meet specific spending criteria, it is expected that the cycle will change in the future, potentially introducing new rewards or reinstating the current ones.
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