Banks Prepare for War on Rewards as Cash Fee Ban Looms

The Reserve Bank of Australia has announced that from October 1, merchants will no longer be able to charge credit or debit card fees on transactions. This decision is expected to cost banks around $600 million in lost income.

In response, banks are planning to claw back this revenue by reducing the benefits offered through rewards programs. For example, Commonwealth Bank's Qantas arrangement will now award fewer points for every dollar spent and require an annual fee of $149 to participate.

Reserve Bank governor Michele Bullock has stated that this decision aims to reduce the disincentive for consumers to use cash instead of cards. However, critics argue that this move is part of a broader 'war on cash' that could lead to reduced competition in the airline industry.

Australia's major banks introduced the Bankcard in 1974, but it eventually failed due to its limited international acceptance. Today, foreign credit card companies profit from Australian customers at the expense of local banks and consumers, who owe over $19 billion on credit cards and face exorbitant interest rates.