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.

Compare rewards credit cards - rates updated daily

  • Apply By 31 October 2018

    Woolworths Everyday Platinum Credit Card

    10% off your 1st Woolworths shop on selected dates once a month. No annual fee for the first year.

    Woolworths Shopping Cards

    $49 $0 in the first year

    No current offer

    1 point uncapped

    • -

    • 19.99% p.a.

    • 0% p.a. for 14 months and then 21.99% p.a.

    • 21.99% p.a.

    • 55

    • 3.00%

    • $35.00

    • 1 point per dollar on Visa, uncapped

    • Never

    • No current offer

    • -

    • -

    • 20,000 points

    • • Concierge

      • Purchase Protection

    Details Close

  • Bendigo Bank Platinum Rewards Mastercard

    Up to 55 days interest free. Earn 1.5 Bendigo Rewards points for every dollar spent.

    Bendigo Rewards

    $89

    No current offer

    1.5 points uncapped

    • -

    • 19.99% p.a.

    • No current offer

    • 21.99% p.a.

    • 55

    • 3.00%

    • $15.00

    • 1.5 points per dollar on Mastercard, uncapped

    • 36 months

    • No current offer

    • 59,264 points

    • 407,407 points

    • 37,040 points

    • • Concierge

      • Travel Insurance

      • Commission-free Travellers Cheques

      • Extended Warranty

      • Purchase Protection

    Details Close

  • Apply By 31 October 2018

    Virgin Money Virgin Australia Velocity Flyer Card - Purchase Rate and Balance Transfer Offer

    Receive a $129 Virgin Australia gift voucher each year. 0% p.a. on purchases for up to 14 months.

    Velocity Frequent Flyer

    $129

    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.

    • 44

    • 3.30%

    • $10.00

    • 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

    • 18,000 points

    • • Concierge

      • Guaranteed Pricing

    Details Close

  • Apply By 26 September 2018

    American Express Explorer® Credit Card

    Receive 75,000 Membership Rewards® Points (T&Cs apply). Also receive $400 Travel Credit each year.

    Membership Rewards

    $395

    75,000

    2 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

    • 2 points per dollar on Amex, uncapped

    • Never

    • 75,000

    • 10,400 points

    • 159,467 points

    • 13,500 points

    • • Travel Insurance

      • Extended Warranty

      • Purchase Protection

      • Account alerts by SMS

    Details Close

  • Apply By 27 November 2018

    Westpac Altitude Black with American Express

    80k Bonus Points (T&Cs apply). Earn 0.75 Qantas points per $1 spent on eligible purchases.

    Qantas Frequent Flyer

    $499 $300 in the first year

    120,000

    1.25 points uncapped

    • -

    • 20.24% p.a.

    • No current offer

    • 20.74% p.a.

    • 45

    • 3.00%

    • $15.00

    • 1.25 points per dollar on Amex, 0.75 points per dollar on Mastercard, uncapped

    • Never

    • 120,000

    • 8,000 points

    • 120,000 points

    • 16,160 points

    • • Concierge

      • Travel Insurance

      • Extended Warranty

      • Purchase Protection

    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.

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