Credit card rewards schemes devalued as interchange fee changes come into effect

Kelly Emmerton

20 Jun 2017

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Key points

  • RBA regulations capping interchange fees at 0.8% come into effect July 1

  • Reduced profits for banks mean spenders will see rewards value drop

  • Lower earn rates, stricter points caps and higher annual fees all on the cards

With the RBA’s interchange fee regulations set to come into effect on July 1, the value of credit card rewards schemes may be about to tank.

In May 2016, the RBA announced new regulations which capped interchange fees charged on Australian-issued Visa and Mastercard credit cards at 0.8%, and which are about to come into effect on July 1 2017.

While this is good news for merchants - who will no longer pay hefty fees for accepting credit cards over the counter - it means banks make less profit from credit card transactions. The likely remedy to what could be a blow to the banks’ bottom lines? Reduced value on rewards credit cards.

A number of major players, including all four big banks, began to slash the value of their rewards schemes after the RBA’s changes were announced. Now, as the July 1 deadline looms, we’re likely to see more credit card providers follow suit.

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    American Express Qantas Discovery Card

    Receive up to 1.75 Qantas Points for every $1 spent on Card purchases (T&Cs apply). No annual fee for the life of the card. Credit Card Provider of the Year in the Mozo Experts Choice Awards 2019.^ T&C’s apply.

    Qantas Frequent Flyer

    $0

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    0.75 points uncapped

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    • 20.74% p.a.

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    • 44

    • 3.00%

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    • 0.75 points per dollar on Amex, uncapped

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    St.George Amplify Platinum

    Earn 60,000 bonus Qantas Points when you spend $2,000 on eligible purchases within 90 days of card approval. New cards only, Eligibility criteria and T&Cs apply. Offer ends September 30th 2020.

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    60,000

    0.5 points uncapped

    • -

    • 19.74% p.a.

    • 0% p.a. for 6 months and then 19.74% p.a.

    • 21.49% p.a.

    • 55

    • 3.00%

    • $15.00

    • 0.5 points per dollar on Visa, uncapped

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    NAB Rewards Platinum Card

    Up to 60,000 bonus points (T&Cs apply). Also get 1 NAB reward point for every $1 spent on everyday purchases.

    NAB Rewards

    $195

    60,000

    1 point uncapped

    • -

    • 19.99% p.a.

    • 0% p.a. for 6 months and then 21.74% p.a. (2.00% balance transfer fee)

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    Westpac Altitude Platinum

    Earn 60,000 bonus Qantas Points when you spend $3,000 on eligible purchases with a new Altitude Platinum credit card within 90 days of card approval. 0% p.a. for 18 months on balance transfers requested at card application. Plus, discounted annual card fee of $99 for the first year. Offer ends November 11th 2020.

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    • 45

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    • $15.00

    • 0.5 points per dollar on Mastercard, uncapped

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    NAB Qantas Rewards Premium Card

    30,000 bonus Qantas Points when you spend $2,500 within 60 days (T&Cs apply).

    Qantas Frequent Flyer

    $250

    30,000

    0.66 points up to $3,000/month, then
    0.33 points up to $6,000/month

    • -

    • 19.99% p.a.

    • 0% p.a. for 6 months and then 21.74% p.a. (2.00% balance transfer fee)

    • 21.74% p.a.

    • 44

    • 3.00%

    • $15.00

    • 0.66 points per dollar on Visa, up to $3,000 per month, then
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    • Never

    • 30,000

    • 8,000 points

    • 110,400 points

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      • Travel Insurance

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      • Domestic Hotel Burglary Insurance

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Mozo Data Manager, Peter Marshall, said there are three main ways banks will be likely to recoup the lost profits from interchange fees; reducing points earn rates, introducing stricter caps and expiry dates on points, and hiking annual fees.

Reducing the amount of points earned per dollar is one of the more common strategies. Credit card giant Citi dropped the earn rate on five of its cards, while CommBank, NAB and Westpac reduced the earn rate on AMEX companion cards - by up to 2.5 points per dollar spent, in one case.

“Spenders who rely on their AMEX companion card to bump up their rewards earn have been left out in the cold a bit, but on the other hand, cards issued directly by AMEX were some of the only options that saw points earn rates increase this year,” Marshall said.

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ANZ also scaled back its rewards program considerably, ditching AMEX companion cards all together and introducing new points caps and tiered earning.

For example, the ANZ Rewards card used to earn cardholders 1.5 points per dollar on AMEX and 0.75 points per dollar on Visa, uncapped. Now, the AMEX companion card is no more, and shoppers can earn 1 point per dollar on Visa, up to $1,000 per month, and 0.5 points per dollar on spends after that threshold.

Suncorp and Virgin Money also introduced lower points caps. Suncorp capped points on its Clear Options Platinum Qantas card at $8,000 a month, while Virgin Money Velocity High Flyer cardholders will now earn 1 point per dollar up to $8,000 per month, down from a cap of $10,000 per month (still with an earn rate of 0.5 points per dollar afterward).

“Points caps and tiered earn rates like this mean cardholders need to be aware of how much they spend each month. If you usually spend under the monthly threshold, then it might not bother you. But if you’re a big spender, the fact that you’ll be losing out on rewards value on a portion of your spend each month is something to consider,” said Marshall. 

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The annual fee was also adjusted on 14 credit cards this year and of those, 8 were increases while in 6 cases the fee was reduced.

“Some card providers may be raising annual fees to make up for lowered interchange profits, but it’s by no means a market-wide trend,” said Marshall.

“The thing to keep an eye on is whether you’re paying a higher annual fee while receiving the same or lesser value from your card. If so, it might be time to look for a new card.”

Want better value from your plastic? Make sure you’re carrying a rewards card that will net you the best bang for your buck by comparing options using our Rewards Revealer tool.

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