Banks Claw Back Rewards Amid Credit Fee Changes

The Reserve Bank of Australia's recent decision to prohibit merchants from charging credit or debit card fees on transactions has banks scrambling to recover lost income. Over the past week, many Australians have received emails from their banks announcing changes to their rewards programs.

The banks are trying to claw back about $600 million in income they would lose due to the fee cap. To achieve this, they are reducing benefits in rewards programs and presenting these changes as 'bigger' or 'better.' For instance, the Commonwealth Bank's Qantas arrangement will now offer fewer points for every dollar spent, with customers having to pay an annual fee of $149 to be part of the program.

The Reserve Bank initially allowed credit-card charges to be identified and passed on to consumers in 2003. This was done in the interest of fairness and transparency, as it ensured that cash customers were not subsidizing card users who benefited from rewards points. However, with the recent decision to prohibit these fees, the Reserve is aiming to promote card usage over cash.

The decision has sparked questions about competition, cash, and who ultimately benefits from Australia's card system. The Reserve Bank estimates that it costs around $50 million per year to supply banknotes for Australians, while cash also incurs costs for merchants due to banking requirements and security risks.