Banks slash reward programs after they were told to lower charges – with thousands of Aussies promising to switch to cash so they get no fees
Australian banks are stripping back credit card rewards programmes ahead of a Reserve Bank crackdown on interchange fees, prompting a backlash from customers who say they will switch to cash to avoid the changes altogether. From 1 October, the RBA will cut the cap on interchange fees, the charges banks levy on businesses for processing card payments, from 0.8 per cent to 0.3 per cent of a transaction's value, a move expected to cost banks roughly $660 million a year. At the same time, businesses will be banned from adding card surcharges, meaning those costs must instead be built into shelf prices, leaving banks looking to recoup the shortfall elsewhere.
Commonwealth Bank is folding its rewards cards into its Yello loyalty scheme from 29 September, with some redemptions, such as a $50 Myer gift card, requiring more points than before. Westpac and its subsidiaries are raising card interest rates by up to 3 per cent and increasing annual fees, including a jump from $75 to $125 for its Qantas Platinum card, while St.George, Bank of Melbourne and Bank SA are shortening interest-free periods from 55 to 45 days. Canstar's Sally Tindall said banks are using the fee changes as a "circuit breaker" to reassess loyalty scheme profitability, and urged customers to weigh up whether their card fees still outweigh the rewards earned, or to consider switching to debit.
- RBA cuts interchange fee cap from 0.8% to 0.3% from 1 October
- Banks respond by cutting rewards, raising fees and interest rates
- Angry customers threaten to switch to cash to avoid charges
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Australian banks are trimming or restructuring their credit card rewards schemes, and the trigger is a regulatory change from the Reserve Bank of Australia. From 1 October, a cap will be lowered on interchange fees, the payments businesses hand over to banks whenever a customer pays by card. Because that cap is being cut sharply, banks stand to lose a large amount of income, and are adjusting fees, interest rates and reward points to make up the difference.
The main players are the big retail banks, including Commonwealth Bank and Westpac along with subsidiaries such as St.George, Bank of Melbourne and Bank SA, all of which run popular credit card loyalty and rewards programmes. Also relevant is the ban on businesses adding separate surcharges for card payments, meaning any extra cost will instead be folded into the price of goods rather than charged directly at checkout. Consumer finance commentators, such as those from comparison site Canstar, are watching how banks respond and advising cardholders on whether their cards still offer good value.
This matters because credit cards and their reward points are widely used across Australia, and any change to fees, interest-free periods or point values affects household budgets. It also touches on a broader debate about how the costs of running a card payments system should be shared between banks, businesses and everyday customers.