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

Kelly Emmerton

20 Jun 2017

Interchange fees content

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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  • Apply By 24 February 2022

    Westpac Altitude Black

    Earn up to 180,000 bonus Altitude Points ($6k min. spend in the first 120 days on eligible purchases). 0% balance transfer for 24 months. 1% BT fee. Discounted Annual Fee of $99 for the first year. New cards only. Offer ends February 24th 2022. T&C's and exclusions apply.

    Altitude Rewards

    $250 $99 in the first year

    180,000

    1.25 points uncapped

    • -

    • 20.49% p.a.

    • 0% p.a. for 24 months and then 21.49% p.a. (1.00% balance transfer fee)

    • 21.49% p.a.

    • 45

    • 3.00%

    • $15.00

    • 1.25 points per dollar on Mastercard, uncapped

    • Never

    • 180,000

    • 23,400 points

    • 318,000 points

    • 24,100 points

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  • NAB Qantas Rewards Signature Card

    NABs fastest way to earn Qantas Points. 110,000 bonus Qantas Points when you spend $3,000 on everyday purchases within 60 days of account opening and keep the card open for 12 months. Access to 6 complimentary insurances when you make eligible purchases.

    Qantas Frequent Flyer

    $395 $295 in the first year

    110,000

    1 point up to $5,000/month, then
    0.5 points up to $20,000/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

    • 1 point per dollar on Visa, up to $5,000 per month, then
      0.5 points per dollar on Visa, up to $20,000 per month

    • Never

    • 110,000

    • 8,000 points

    • 110,400 points

    • 19,010 points

    • • Concierge

      • Extended Warranty

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      • International Travel Insurance

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  • St.George Amplify Rewards Signature

    Earn up to 200,000 Bonus Amplify Rewards Points over 2 years (100k yr 1, 100k yr 2) when you spend $12k on eligible purchases each year. New cards only, Eligibility criteria and T&Cs apply. Offer ends February 24th 2022.

    Rewards

    $279

    200,000

    1.5 points uncapped

    • -

    • 19.74% p.a.

    • 0% p.a. for 15 months and then 21.49% p.a. (1.00% balance transfer fee)

    • 21.49% p.a.

    • 55

    • 3.00%

    • $15.00

    • 1.5 points per dollar on Visa, uncapped

    • Never

    • 200,000

    • 15,600 points

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  • Apply By 13 December 2021

    American Express Velocity Platinum Card

    Receive 120,000 bonus Velocity Points and 120 Status Credits when you apply online by 13 December 2021, are approved and spend $4,500 on your new Card within the first 3 months. New Card Members Only. Enjoy a complimentary domestic return flight with Virgin Australia to selected cities, each year after your first card spend.

    Velocity Frequent Flyer

    $375

    120,000

    1.25 points uncapped

    • -

    • 20.74% p.a.

    • No current offer

    • 55

    • 3.00%

    • $30.00

    • 1.25 points per dollar on Amex, uncapped

    • Never

    • 120,000

    • 7,800 points

    • 119,600 points

    • 19,500 points

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      • Purchase Protection

      • Account alerts by SMS

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  • Apply By 24 February 2022

    Westpac Altitude Platinum

    Earn up to 75,000 bonus Qantas Points ($4k min. spend in the first 90 days on eligible purchases). 0% p.a. for 24 months on balance transfers requested at card application. 1% BT fee applies. $49 First Year Annual fee and Rewards fee. New cards only. Offer ends February 24th 2022. T&C's and exclusions apply.

    Qantas Frequent Flyer

    $200 $99 in the first year

    75,000

    0.5 points uncapped

    • -

    • 20.49% p.a.

    • 0% p.a. for 24 months and then 21.49% p.a. (1.00% balance transfer fee)

    • 21.49% p.a.

    • 45

    • 3.00%

    • $15.00

    • 0.5 points per dollar on Mastercard, uncapped

    • Never

    • 75,000

    • 8,000 points

    • 110,400 points

    • 19,010 points

    • • Travel Insurance

      • Extended Warranty

      • Purchase Protection

    Read our Mozo Review to learn more about the Altitude Platinum

    Details Close

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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.

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.