Credit card rewards schemes devalued as interchange fee changes come into effect
20 Jun 2017
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.
Compare rewards credit cards - rates updated daily
-
Promoted
Apply By 31 January 2020
CitiCiti Platinum - Bonus Points Offer
Reward yourself with up to 80,000 bonus points! By spending $3,000 within 90 days of card approval. Plus with tonnes of travel redemption options, you'll be booking that family holiday before you know it.
Citi Rewards
$149 $49 in the first year
80,000
1 point up to $10,000/month
-
-
-
21.49% p.a.
-
0% p.a. for 15 months and then 22.24% p.a. (1.00% balance transfer fee)
-
22.24% p.a.
-
55
-
3.40%
-
$30.00
-
1 point per dollar on Visa, up to $10,000 per month
-
Never
-
80,000
-
-
19,500 points
-
299,000 points
-
22,300 points
-
-
• Concierge
• Travel Insurance
• Extended Warranty
• Purchase Protection
Read our Mozo Review to learn more about the Platinum - Bonus Points Offer
Details Close
-
-
Promoted
American Express
American Express Velocity Escape Card
Earn up to 1.75 Velocity Points. Have limited stress with the Velocity Escape with no annual fees and receive 0% p.a. on balance transfers for the first 12 months. Credit Card Provider of the Year in the Mozo Experts Choice Awards 2018.^ T&C’s apply
Velocity Frequent Flyer
$0
No current offer
0.75 points uncapped
-
-
-
20.74% p.a.
-
0% p.a. for 12 months and then 20.74% p.a. (1.00% balance transfer fee)
-
-
55
-
3.00%
-
$30.00
-
0.75 points per dollar on Amex, uncapped
-
Never
-
No current offer
-
-
7,800 points
-
119,600 points
-
21,800 points
-
-
• Purchase Protection
• Account alerts by SMS
Read our Mozo Review to learn more about the Velocity Escape Card
Details Close
-
-
Promoted
Virgin MoneyVirgin Money Virgin Australia Velocity Flyer Card - Purchase Rate and Balance Transfer Offer
Receive a $129 Virgin Australia gift voucher each year. 0.0% p.a. on purchases for up to 14 months. $64 annual fee in the first year ($129 after) .
Velocity Frequent Flyer
$129 $64 in the first year
No current offer
0.66 points up to $1,500/month, then
0.5 points uncapped-
0% p.a. for 14 months
-
20.74% p.a.
-
0% p.a. for 6 months and then 20.99% p.a.
-
20.99% p.a.
-
55
-
3.30%
-
$30.00
-
0.66 points per dollar on Visa, up to $1,500 per month, then
0.5 points per dollar on Visa, uncapped -
Never
-
No current offer
-
-
7,800 points
-
119,600 points
-
21,800 points
-
-
• Concierge
• Guaranteed Pricing
Read our Mozo Review to learn more about the Virgin Australia Velocity Flyer Card - Purchase Rate and Balance Transfer Offer
Details Close
-
-
Promoted
ANZ ANZ Frequent Flyer Black
Score 100,000 Bonus Qantas Points and $200 cash back to your new card by spending $4,000 in the first 3 months. Eligibility criteria, T&Cs, fees and charges apply. Winner Mozo Expert Choice Award 2018 - Premium Card Benefits.^
Qantas Frequent Flyer
$425
100,000
1 point up to $7,500/month, then
0.5 points uncapped-
-
-
20.24% p.a.
-
No current offer
-
20.24% p.a.
-
55
-
3.00%
-
$20.00
-
1 point per dollar on Visa, up to $7,500 per month, then
0.5 points per dollar on Visa, uncapped -
Never
-
100,000
-
-
8,000 points
-
110,400 points
-
18,040 points
-
-
• Concierge
• Extended Warranty
• Purchase Protection
• Guaranteed Pricing Scheme
• International Travel Insurance
Read our Mozo Review to learn more about the Frequent Flyer Black
Details Close
-
-
Promoted
Apply By 30 November 2019
CitiCiti Platinum - Balance Transfer Offer
0% per annum for 26 months on purchases and balance transfers. No Annual Fee for the first year then $199 each year after. Complimentary International Travel Insurance.
Citi Rewards
$199 $0 in the first year
No current offer
1 point up to $10,000/month
-
-
-
21.49% p.a.
-
0% p.a. for 26 months and then 22.24% p.a. (1.50% balance transfer fee)
-
22.24% p.a.
-
55
-
3.40%
-
$30.00
-
1 point per dollar on Visa, up to $10,000 per month
-
Never
-
No current offer
-
-
19,500 points
-
299,000 points
-
22,300 points
-
-
• Concierge
• Travel Insurance
• Extended Warranty
• Purchase Protection
Read our Mozo Review to learn more about the Platinum - Balance Transfer Offer
Details Close
-
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.
RELATED: Credit card providers shaking up the way you pay with interest free offers
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.
RELATED: New Qantas rewards credit card: all you need to know about points, fees and bonuses
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.
Mozo may receive advertising fees from the financial institutions, issuers of financial or credit products and third party advice providers that are shown on this page. These fees are based on a cost per click, cost per acquisition, or a fixed fee.
