Banks have begun reining in the generosity of credit card rewards schemes by slashing points earning rates up to 50 per cent, hiking fees and cutting back airport lounge access, ahead of a ban on the surcharges that have funded such perks.
In changes that will make it more difficult to accrue Qantas Frequent Flyer and other airline points, the generosity of rewards schemes under NAB’s white-label program – which includes cards distributed under the Bank of Queensland, Virgin Money and MyCard brands – will be cut back from the day the surcharge ban comes into effect on October 1.
NAB’s move, which it announced on Thursday, is seen by the observers as the first wave in an expected tidal shift in credit card perks in response to the RBA’s reforms by lowering caps on “intercharge fees”, which are paid by merchants every time a shopper pays for something with a card.
Bonus point incentives to woo new card sign-ups are also widely predicted to be reduced under the new regime, which the RBA has implemented to make Australia’s card payments fairer as cash usage declines.
Credit card customers of the NAB white-label products were told the changes were a direct result of the Reserve Bank’s actions, which will also cut banks’ revenue by an expected $660 million a year. “Why we’re making these changes: the Reserve Bank is changing the rules for card payments in Australia and these changes affect how we pay for extra card benefits. As part of a broader review of our products, we’re making changes to your card,” emails sent to customers said.
What’s changing for MyCard cards?
MyCard Prestige
MyCard Premier
- Earn rates for internal points currency broadly decrease
MyCard Premier Qantas
- Earn rate of 1 point per dollar removed, flat earn rate of 0.5 Qantas points per dollar across all transaction
- Monthly spending cap of $7000
MyCard Rewards
- Fee increase from $199 per annum to $249 per annum
MyCard Simplicity
- Previously fee-free, moving to $49 per annum
Among the most dramatic changes are in the MyCard product line, which were formerly Citibank cards, where its most premium “Prestige” card – which included 15 airport lounge visits, free hotel stay extensions and cashback on ride-shares, on top of generous points earning rates – has been scrapped entirely.
Customers will be consolidated onto the “Premier” tier, in which the general earning rate of two points per dollar spent on online purchases will be removed and a broad 1.5 points per dollar rate for domestic purchases introduced. For other cards in the line-up, annual fees will increase from $199 to $249. A previously fee-free card will soon cost $49 per year.
Points can be spent on vouchers or converted to airline-specific points – a currency that card issuers buy en masse from airlines as perks to offer customers for their in-house points or as sign-up bonus incentives.
However, in a sign of the areas where banks can look to recoup revenue lost to the surcharge ban and interchange fee caps, MyCard’s conversion rate to Virgin Velocity points will worsen across most cards.
What’s changing for Virgin and Bank of Queensland cards from October?
Virgin Australia Velocity Flyer Card
- Fee increase from $149 per annum to $169 per annum
- Earn rates drop from 0.66 Velocity Points per $1 spent up to $1500 then 0.5 points thereafter, down to 0.5 points per $1 spent up to $1500 then 0.25 points thereafter
Virgin Australia Velocity High Flyer Credit Card
- Fee increase from $329 per annum to $349 per annum
- Earn rates drop from 1 Velocity Points per $1 spent up to $8000 then 0.5 points thereafter, down to 0.75 points per $1 spent up to $5000 then 0.25 points thereafter
Virgin Money Anytime Rewards Card
- Ending its broad 1 point per $1 rate to a category-specific rate of 1 point per $1 spent at supermarkets and restaurants and 0.5 points on all other transactions
- Fee increase from $149 per annum to $169 per annum
- Interest-free period reduced from 55 to 44 days
Bank of Queensland Platinum Visa Credit Card
- Earn rates for internal points currency broadly decrease for general spending (though an increase in points for dollars spent at supermarkets)
- Retail purchase rate increases from 20.99% per annum to 21.99% per annum
Bank of Queensland Blue Visa Credit Card
- Retail purchase rate increases from 20.99% per annum to 21.99% per annum
Hit even harder is MyCard’s Qantas-specific earning card. While an earning rate of one point per dollar was broadly available for online and international purchases, the bank has announced a new flat rate of 0.5 Qantas points per dollar earned across all transactions within a $7000 per month spending cap.
For Virgin Money’s High Flyer card there will broadly be a 25 per cent reduction in the earning rate of Virgin Velocity points, as well as a 37.5 per cent reduction in the high-yield spending threshold.
Virgin’s Anytime Reward credit card’s dollar-to-point earning rate will be cut by 50 per cent, save for a higher rate customers will earn on supermarket and dining spend only.
Bank of Queensland’s Platinum Visa rewards card will change how customers earn by category of purchase, with general spending significantly reduced.
A NAB spokesman did not provide information on what changes the bank would make to cards that bear its own branding.
Elsewhere, American Express has also announced a scaling back of its airport lounge benefits. While American Express was technically not subject to the RBA’s surcharge ban and interchange fee changes, it has said it will voluntarily change its rules so merchants can’t add on surcharges, in a move that will make the ban consistent for all credit card users.
From October 1, access to Priority Pass and Plaza Premium lounges, which had been extended to additional or employee cardholders attached to accounts, will be axed, while guest access will be limited to one person. Access to Lufthansa’s network of lounges, which had been extended to cardholders, will also end.
Adele Eliseo, publisher of the rewards advice website The Champagne Mile, said she expects all banks and card providers to come out with announcements of similar changes before the October ban comes into effect.
“It’s going to be hard for any card provider to fund rewards credit cards in the same way,” she said.
“We certainly anticipated cuts to earning thresholds, and expect cuts for sign-on bonuses when people take out a card. Instead, we expect them to construct bonuses that prioritise customers staying on for two years, so they pay two annual fees before they unlock the full bonus points amount.”
Brandon Loo, editor-in-chief at advice website Point Hacks, said the NAB changes showed that the benefits Australians have come to expect from the most premium high-fee, high-earning credit cards were no longer viable.
“Those sort of perks are clearly unsustainable under the new system,” Loo said.
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Elias Visontay is a National Consumer Affairs Reporter at The Sydney Morning Herald and The Age.Connect via email.From our partners
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