Axis Bank cracks down on customers who gamed its rewards system—even those who left

“Since you have redeemed X excess reward points beyond what is rightfully accrued by your transactions, we request you to pay INR 23,25,639 to the Bank as per MITC clause…”

The notice was part of the bank’s recent effort to recover rewards points accumulated by some credit card holders through a technical loophole in 2023. The recipient had closed his Axis Magnus credit card in December 2023, and is no longer a customer—yet the bank is still pursuing repayment

The loophole that sparked a crackdown

Ordinarily, when a credit card transaction is refunded, the reward points earned on that transaction are reversed. In 2023, Axis Bank failed to do this for cancelled transactions.

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Some customers exploited the oversight. They placed high-value orders on e-commerce platforms, earned the corresponding rewards, and then cancelled the orders. Axis Bank refunded the amounts but did not revoke the reward points.

Industry experts say reversing points upon refund is a standard practice across all banks.

This glitch persisted for two years before Axis Bank finally fixed it in January 2024, said Sumanta Mandal, founder of TechnoFino, an online platform that reviews banking products such as credit cards.

Now, Axis Bank is clawing back the excess rewards. It has begun deducting points from affected customers’ Edge Rewards (ER) accounts. In cases where customers lack sufficient points, their ER balances have turned negative—requiring them to pay the shortfall in cash.

“Due to a technical issue, EDGE REWARD Points from cancelled/reversed/EMI transactions on your Axis Bank credit card(s) between April ’23 and Jan ’24 were not reversed. These points have now been deducted from your EDGE REWARDS account,” read an email sent to a customer.

Bank goes after even ex-customers

Customers who no longer hold Axis credit cards aren’t exempt. Those with closed accounts have received notices demanding payment based on the valuation of their excess rewards.

Tejas Ghongadi, co-founder of The Points Code, said the bank might post the cash equivalent of the negative points balance on the credit card statements of active cardholders. But for former customers, the path forward remains unclear.

It remains unclear how the bank will generate a statement for a closed card if the customer doesn’t pay voluntarily, according to experts. Without an outstanding balance to impact their credit score, former customers may have little incentive to settle the claims.

Axis Bank, however, has warned that failure to comply may lead to legal consequences.

Is Axis Bank justified?

Axis Bank is relying on Clause G of its Most Important Terms and Conditions (MITC) to justify the recovery effort. The clause states that if a cardholder has a negative rewards balance at the time of account closure, the equivalent amount will be converted into a statement debit that must be repaid before the card is officially closed.

Yet critics argue that the rule was introduced after many of these former customers had already shut their accounts.

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MITC was changed later—this rule didn’t exist when these former customers closed their cards, said Ghongadi. “The bank’s reconciliation process has been very slow.”

A review of older MITC documents supports his claim: the negative rewards balance clause wasn’t present when many of the affected customers shut their accounts.

Sanjeev Moghe, president and head of cards and payments at Axis Bank, said the bank regularly evaluates how customers use credit card benefits.

“(W)henever the bank observes a pattern of transactions that amounts to misuse of the benefits, the bank takes an action to discourage inappropriate usage,” he said.

Experts are divided on whether the bank can apply a rule retroactively.

“This clause didn’t exist in the agreement they signed when they were still customers,” Mandal said. “How can the bank charge them retrospectively? If the bank reactivates a closed card, for which the customer would already have an NOC from the bank, the latter can escalate the issue to the RBI (Reserve Bank of India) and even take the matter to consumer court.”

Ghongadi noted that while the retroactive recovery may violate standard rules, in a few cases it’s being done on the grounds of fraudulent behaviour, which the bank may be justified in carrying out.

Most banks take action against customers when they see credit card rewards being earned through misuse. However, the actions are typically swift and hence taken within the purview of the agreement contract.

What’s at stake for customers

According to Axis Bank, fewer than 100 people have received recovery notices. “The number of such identified cards is 72 (0.0004%), which is a miniscule number of the bank’s credit card portfolio,” Moghe said.

The bank, however, did not disclose the total amount it aims to recover.

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Current cardholders will see the recovery amount reflected in their credit card statements. Experts advise that those considering a challenge should first pay the balance to avoid credit score damage before filing a complaint with the banking ombudsman.

For some, however, repayment may be financially unfeasible. In three such cases, emails reviewed by Mint show recovery amounts of ₹42.26 lakh, ₹7.2 lakh, and around ₹6 lakh—excluding the ₹23.25 lakh demand mentioned earlier.”

Mandal believes the case boils down to contractual liability rather than morality.

“Many will bring up the moral argument that why did customers misuse the reward system in the first place. My question is why didn’t Axis Bank have proper controls in place?” he said. “Reversing reward points immediately after a transaction is refunded is a basic functionality. To recover the rewards in retrospection is unfair.”

In banking and finance, Mandal added, contractual agreements override ethical considerations. “Suppose you take a loan without insurance, meet with an accident and lose your job. Your employer won’t pay you, and the bank won’t spare you—they will still demand repayment. The bank will not think twice before sending a recovery agent to your address.”

Also read | Devaluations are normal. So, why is it hurting Axis credit card holders?

This isn’t the first time Axis Bank has pursued customers over alleged misuse of credit cards. In 2023 and 2024, it cancelled cashback cards and suspended reward redemptions for customers suspected of using personal cards for business purposes. Affected individuals were asked to provide invoices and other proof that their transactions were personal.

Gaming the rewards system can be lucrative, but cardholders should refrain as banks always find a way to settle the score.