Frequent flyer rewards users may bear brunt of proposed changes by RBA
Frequent flyer credit card customers in Australia could miss out on rewards points if the RBA’s proposed credit card surcharge fee changes take effect. The RBA released a paper yesterday called “Review of card payments regulation” which called for a lower cap on interchange fees.
An interchange fee according to MasterCard online, is a “fee paid between a merchant’s bank and a cardholder’s bank to balance the costs in the payments system”.
The RBA speculated that because credit card providers will have to charge less in fees, they’ll recoup their losses by limiting rewards card perks.
“The reduction in interchange fees, especially the cap on the highest credit card rates, is likely to result in some reduction in the generosity of rewards programs on premium cards,” said the RBA in the report.
As the RBA stated in the report, interchange fees are currently capped at 0.50% for credit and 12 cents for debit for each transaction. But the credit card enquiry could bring that down to an average of 8 cents per transaction for debit and credit cards.
Australia’s central bank received 40 submissions from financial institutions, merchants, and consumer groups for the credit card enquiry.
The report the enquiry produced proved positive for businesses who have plastic payment facilities for their products and services. This is because fees charged by their banks will be capped at a lower rate.
The Bank promised to work closely with Treasury and the ACCC towards a reduction in excessive credit card surcharges in the weeks ahead.
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