Did the RBA interchange fee cap just slash the value of your rewards credit card? Find out here.

A lower cap on interchange fees charged between banks to a credit card maximum of 0.8% is expected to shake up the rewards landscape for cardholders in Australia.

The RBA announced yesterday its reform would bridge the gap between what debit and credit cardholders pay per transaction.

“The existence of significant credit card rewards programs suggests that credit card interchange fees are currently materially higher than is necessary for banks to provide payment cards with credit functionality,” it stated.

MasterCard is disappointed with the move, citing evidence that Australian cardholders have been paying more than countries such as Spain and the US since the RBA’s initial regulation of interchange 14 years ago.

“As a result of changes like this, the value delivered to consumers when they use cards is reduced and the costs they pay increased,” said Country Manager at MasterCard, Andrew Cartwright.

According to AMEX, in the traditional banking environment, rewards are primarily funded by fees paid between the customer’s bank and the bank of the business where the customer’s purchase is made.

This means the value of rewards points in Australia is likely to drop due to the RBA lowering the interchange fee cap.

“Under these new rules, customers with a wider range of credit cards are likely to earn fewer points when they spend, and receive less value when they redeem their points,” said AMEX.

Customers affected include those with Visa, MasterCard and AMEX credit cards issued by banks, with the exception of AMEX cards issued by the provider directly.

AMEX has also flagged the possibility of placing a cap on points its customers can earn in calendar cycles to adapt to the changes.

“It’s not all doom and gloom for Australians with rewards cards,” said Mozo Director Kirsty Lamont.

“Cardholders will just need to be extra vigilant by understanding the value of their points and what they can redeem with them, to ensure their card is still delivering value.”

Have a rewards credit card? Here’s how to make it work.

  • According to AMEX, as a result of these changes, rewards card providers may introduce lower caps on the points you can earn per cycle. So check with your provider whether caps will be placed on the amount of rewards points you can earn, to work out whether you’ll need to change the way you use your card or switch to a different rewards credit card.
  • Know the expiry date of your points so you don’t miss out on the rewards you’re entitled to.
  • Card providers may also increase the number of points you’ll need to rack up for a rewards redemption option (e.g flights or gift card). If you find your rewards credit card has been devalued, use Mozo’s rewards revealer tool, which will help you determine the type of card that would suit your spending habits best.
  • For more tips, read our latest guides and treat yourself to the perfect rewards card.