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 07 September 2021

    Westpac Altitude Platinum

    Earn up to 80,000 bonus Altitude Points ($3k min. spend in the first 90 days on eligible purchases). Enjoy up to 45 days interest free with a 0% balance transfer for 18 months (rate then reverts to 21.49% after). 1% BT fee. Only $99 annual card fee for the first year, $150 thereafter.

    Altitude Rewards

    $150 $99 in the first year

    80,000

    1 point uncapped

    • -

    • 20.49% p.a.

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    • 21.49% p.a.

    • 45

    • 3.00%

    • $15.00

    • 1 point per dollar on Mastercard, uncapped

    • Never

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    • 212,000 points

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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. T&C’s apply. Mozo Experts Choice Qantas Frequent Flyer Credit Card Winner 2020.

    Qantas Frequent Flyer

    $0

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    0.75 points uncapped

    • -

    • 20.74% p.a.

    • No current offer

    • 44

    • 3.00%

    • $30.00

    • 0.75 points per dollar on Amex, uncapped

    • Never

    • No current offer

    • 8,000 points

    • 110,400 points

    • 19,730 points

    • • Purchase Protection

      • Account alerts by SMS

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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

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    • 19.99% p.a.

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    • 21.74% p.a.

    • 44

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    • $15.00

    • 1 point per dollar on Visa, up to $5,000 per month, then
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    • Never

    • 110,000

    • 8,000 points

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    American Express Explorer® Credit Card

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    $395

    90,000

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    • -

    • 20.74% p.a.

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    • 55

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    • 2 points per dollar on Amex, uncapped

    • Never

    • 90,000

    • 15,600 points

    • 212,000 points

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  • St.George Amplify 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 28th September 2021.

    Amplify 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

    • 212,000 points

    • 22,200 points

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      • Travel Insurance

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      • Guaranteed Pricing

      • Rental Car Excess Cover

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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.