Credit Card Rewards Plummet as Reserve Bank Caps Interchange Rates

The Reserve Bank's upcoming caps on credit card 'interchange rates' are squeezing bank margins, leading banks to reduce rewards and other perks. Many customers will pay more for their credit cards but get less value in return.

Banks like Commonwealth Bank, NAB, Westpac, Virgin Money, and HSBC are making cuts to frequent flyer points awarded for ongoing spending. For example, Commonwealth Bank's top-tier 'Ultimate' credit card is dropping from 1.5 Velocity points per Australian dollar charged abroad to just 0.8 Velocity points per dollar spent overseas.

However, ANZ is bucking the trend by continuing to provide one full airline frequent flyer point per dollar spent via its top-shelf cards. American Express hasn't announced any further cuts, but devalued its Membership Rewards program last year to require 50% more credit card points for equivalent flight rewards.

Despite these changes, new opportunities are emerging. Qantas will begin offering status credits on the ground from December 8, allowing members to earn up to 140 status credits each year without taking a single flight.