Banks Claw Back Credit Card Rewards Amid Reserve Bank Fee Change

The Reserve Bank of Australia's decision to prohibit merchants from charging credit or debit card fees on transactions has led banks to claw back around $600 million in lost income.

To achieve this, banks are reducing rewards program benefits and rebranding the changes as improvements, which ultimately benefit customers. However, under the new schemes, customers will receive fewer points for every dollar spent, with some programs now requiring an annual fee of up to $149.

The policy change raises questions about competition, cash usage, and who benefits from Australia's card system. The Reserve Bank aims to remove any disincentive to use cards over cash, as the latter costs the bank around $50 million a year to supply and poses security risks for merchants.

Critics argue that the decision will lead to increased costs for consumers, who already owe about $19 billion on credit cards. The major credit card companies, which are largely owned by international shareholders, cream off more than $6 billion annually from Australian customers.