When you first get a credit card, usually you get drawn in with some perks or rewards that you value in addition to an attractive rate and then continue on with the same card for years and years assuming everything has stayed the same (and skipping over those ‘changes to your terms and conditions’ emails that your bank may send you). Well, there are some changes that have happened recently that might make you re-evaluate if you’re happy to stick with your current credit card or whether the benefits you thought you were getting aren’t a reality anymore.
Back in 2016, the Reserve Bank of Australia announced changes to credit card payment regulations. Those changes came into effect across all merchants on September 1st 2017, and as predicted have had an impact on consumers looking to earn frequent flyer points through their credit card spend.
The changes concern something called ‘interchange fees’, these are a small fee paid by a merchant’s bank to a cardholder’s bank to compensate the issuer for the value and benefits that merchants receive when they accept electronic payments. The new laws now cap interchange fees at 0.8%, whereas some used to be as high as 2%. This cap means that the amount of money that banks receive from interchange fees will be greatly reduced, and this is how banks have traditionally funded their rewards programs.
Since the regulations have come into effect, all of the big four banks have altered their rewards programs, with ANZ ceasing to offer dual American Express cards, and CBA, Westpac and NAB all reducing earn rates across their dual Amex products.
While the changes to all the credit card providers are wide and varied, generally it has become harder to earn rewards points from credit card spending, and in some cases like Citi, they have increased the number of Citi Rewards points it takes to convert to frequent flyer points.
Amex-issued cards (i.e. not dual branded cards issued by another bank) have not been affected, as they have their own payment system that does not rely and an interchange fee system. Amex cards have maintained their earn rates, making them a more attractive option for people looking to maintain their points earning potential.
Time will tell if Amex decides to pull back on their earn rates, as there is room for them to offer less points per dollar spent, but also remain more competitive than other credit card providers.
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