A slew of changes to credit card rewards programs mean that earning points when you pay with plastic could get a whole lot more complicated. Here’s what you need to know for 2016 and beyond.
In late 2015 and early 2016, several credit card companies – including Citibank, CUA, Virgin Australia and Suncorp – began updating their rewards programs in response to changes in the fees that they earn from Visa, MasterCard and Amex when a purchase is made.
While credit card reward programs have always been updated regularly, these particular changes will see people earning fewer points per $1 and dealing with stricter points caps. They will also end up getting less value out of point transfers to other rewards programs in some cases.
It started in November 2015 when the Commonwealth Bank made changes to some of the ways reward points could be earned by its credit card customers.
Citibank followed with more extreme changes for its entire credit card portfolio – including Virgin branded credit cards – and then Suncorp and Card Services made changes to their cards soon after that.
Why have these changes happened?
Not all of these credit card companies have given reasons for their updated terms and conditions, but the ones that have are citing changes to the pricing of interchange fees. This fee is charged to businesses for processing credit payments and then passed on to banks, resulting in millions of dollars in revenue.
Interchange fees have come under scrutiny due to the high cost to businesses, which have been passing some of the expense onto consumers in the form of credit card surcharges. Revisions to make interchange fees more manageable (and reduce surcharging) have affected the costs of running credit card reward programs, and issuers are feeling the pinch.
‘Due to the external repricing of interchange rates, effective November 1, the revenues that Citi receives from individual credit card transactions has significantly decreased,’ a spokesman for Citi told Fairfax Media after their credit card changes were announced.
‘As a result of this change, Citi has advised customers that its credit card rewards program will be amended from March next year.’
What’s changed so far?
Here’s a breakdown of the revisions to credit card rewards programs that have been announced so far, organised by card brand.
Changes to earn rates will see the ANZ Black and Platinum Rewards card range drop in value. Effective as of 22 March 2016, some of the changes you can expect include:
- ANZ Rewards black Visa. The earn rate will drop from 2 point per $1 spent to 1.25.
- ANZ Rewards Platinum American Express. The current 3 ANZ Rewards points per $1 will fall to 2 points per dollar.
- ANZ Rewards Platinum Visa. The earn rate on this card will decrease from 1.5 points to 1 point per dollar spent.
ANZ Rewards Black American Express cardholders will be happy to know that its earn rate remains at 3 points per dollar spent.
As well as a drop in earn rates, the amount of points you need to redeem some rewards is also expected to rise. For example, the number of points you need to redeem a $100 cashback offer has risen from 20,620 to 25,000 points.
These changes were made in November 2015, effective immediately.
- Eligible purchases: Payments made to the Australian Taxation Office (ATO) are no longer considered eligible for earning reward points (unless made using a Business Rewards card).
- Qantas Frequent Flyer reward points: Cardholders that opt-in to earn Qantas points directly are now charged a $30 annual fee (up from $10).
These changes were announced in December 2015 and come into effect from 18 March 2016.
- Eligible purchases: Credit card BPAY payments will no longer be considered an eligible purchase for earning points.
- Citibank Signature rewards: Cardholders will earn 1.5 points per $1 on overseas spending (down from 4 points per $1).
- Citibank Emirates rewards: Cardholders will earn 1.25 points per $1 for overseas transactions (down from 1.5 points). They will also earn a reduced rate of 1.5 points per $1 for Emirates bookings made with the card (down from 2 points).
- Higher international transaction costs: A new international transaction fee of 3.4% will be applied to all overseas transactions. This change also increases the cost of earning points for overseas spending.
- Exchanging Citibank Rewards points: Transferring points to the Velocity or KrisFlyer frequent flyer program will cost more. While it’s currently 1.5 Citi points for 1 Velocity or KrisFlyer point, in March it will go up to 2 Citi points per 1 point, with a minimum transfer of 20,000 points.
- Points caps: Citibank Signature cardholders will have points capped at the first $20,000 spent for each monthly statement period. Citibank Qantas Signature and Emirates Citi World MasterCard customers will also have new caps, earning 1 point per $1 for the first $3,000 spent in a month, and 0.5 points per $1 for spending up to $10,000.
These changes were announced in December 2015 and come into effect on 1 April 2016.
- Velocity Flyer points: Cardholders will earn 0.66 points per $1 (down from 1 point) for the first $1,500 spent each month, and 0.5 points per $1 after that. They will still earn 1 point per $1 spent with Virgin, uncapped.
- Velocity High Flyer points: Cardholders will earn 1 point per $1 for the first $10,000 spent each month (down from 1.25 points) and 0.5 points per $1 after that. Points earned for Virgin Australia purchases increases from 1.25 points per $1 to 3 points per $1.
- New flight offer: Instead of the 2-for-1 Virgin Australia ticket offer, cardholders will get a $129 Virgin Australia gift voucher each year, starting from ‘mid-2016’.
- Virgin Australia Lounge passes: Velocity High Flyer cardholders will get two complimentary lounge passes per year.
Citigroup Card Services Changes
Card Services is the financial issuer of a range of branded credit cards, including the Citibank and Virgin Money credit cards detailed above. The changes made by Card Services also impact on credit cards from Suncorp, CUA, IMB Bank, QT Mutual and Southern Cross Credit Union.
The Card Services updates were announced in December 2015 and apply from March or April 2016 (depending on the feature). Here are some of the most significant revisions to date:
- Suncorp Clear Options Gold: Cardholders will earn just 0.25 Qantas points per $1 spent, or 1 Suncorp rewards point per $1 for the first $1,500 per month and 0.5 Suncorp points per $1 after that.
- Suncorp Platinum points: Platinum cardholders that earn Qantas points will have a reduced earning rate of 0.5 Qantas points per dollar.
- Suncorp Rewards transfers to frequent flyer programs: The cost of transferring rewards increases from 1 May 2016, with 2.5 Suncorp Reward points equal to 1 Velocity or KrisFlyer point (up from 2 Suncorp points). The minimum transfer amount also increases from 20,000 Suncorp points to 25,000.
- Platinum CUA, IMB Bank, QT Mutual and Southern Cross Credit Union rewards: Cardholders will earn one point per dollar spent (down from 1.25 points), with a yearly cap of 100,000 points.
- Eligible purchases: As with Citibank branded credit cards, all Card Services cards will no longer earn points for BPAY payments.
It’s also worth noting that other companies linked to Card Services – such as Bank of Queensland – could also be affected at a later date, so if you have a credit card that is underwritten by Citigroup/Card Services, be sure to check for any updates to the rewards program. And if you are unsure about whether or not your card is linked to Card Services, check the fine print for the credit provider of the card. If it’s Citigroup, then you could be affected now or at some stage in the future.
It’s also likely that other credit card companies will make adjustments to their reward programs in the near future. Other changes could include a phasing-out of dual credit card accounts that come with both an American Express and a Visa or MasterCard option. This is because these are expensive for credit card companies to issue, but it’s likely that point earning rates and capping will be the first things to change.Back to top
Other common limitations with credit card rewards
The changes above have brought attention to the limitations that can come with having a rewards credit card – but they are the tip of the iceberg. Here are a few other factors that could limit the value of your rewards card:
- Introductory point offers: These deals offer hundreds or even thousands of bonus points for new cardholders, but the introductory offers only last for a limited time. To be eligible for the points, make sure you apply within the promotional period and meet all other requirements (see next point).
- Bonus point spending requirements: Bonus point offers for new reward card customers usually require you to spend a set amount in the first few months you have the card. For example, a card offering 5,000 bonus frequent flyer points may require you to spend $2,000 in the first month. Make sure you check these terms and plan how you will meet them so that you can earn the extra points and avoid carrying a balance.
- Point expiry: Some reward programs have an expiry date for points earned on the account. If you don’t redeem the points within that time, you will lose them, so make sure you check the fine print for this condition (or look for credit cards that say “no point expiry”).
- Blackout periods for redemptions: Some reward redemptions – particularly flights and hotel stays – can have blackout periods where you won’t be able to use rewards to make a booking. These limitations should be outlined in your rewards program booklet or online, and it’s a good idea to check before you try to redeem reward points for any bookings.
Not all reward credit cards have all of these conditions, but many of them do. It’s also likely that they will be adjusted based on industry reforms and changes in the market. So if you have a rewards card or want one, keep an eye on the terms and conditions to make sure you know exactly what you’re getting.Back to top
How to deal with credit card reward restrictions
With all the different features and requirements that come with a rewards credit card, it often feels like you have to jump through a lot of hoops to get any benefits. The following credit card hacks can help you get as much value out of rewards as possible.
- Compare reward credit cards. Whether you currently have a reward credit card or are looking for one, it’s important to compare different options to make sure you get the best deal for your circumstances – especially now that features are changing. Key features to consider are: the amount of points earned per $1, the bonus points offer and conditions, the standard purchase rate and the annual fee.
- Consider a no annual fee rewards card. With so many reward credit cards set to earn fewer points per $1 from 2016 on, the cost of an annual fee could wipe out any potential value from the program. There are a number of reward cards that charge no annual fee for the life of the card – such as the American Express Velocity Escape or American Express Qantas Discovery – which can make it a lot more affordable to earn rewards over time.
- Look for point specials or reward partner deals. Some reward programs offer special point rates for different types of purchases on a seasonal basis. Velocity and Qantas, for example, both have a lot of reward partners and may offer a higher points rate for purchases you make during a set promotional period. The same goes for credit card-branded reward programs.
- Plan redemptions. The value of reward points varies significantly when it comes to redemptions. For example, you can get a one-way domestic flight with Velocity for 6,900 points, or a $50 gift card for 9,000 points. Credit card branded reward programs, such as Citibank Rewards or ANZ Rewards also have specials on redemptions that can save you points. So by planning your redemptions based on these details you can choose redemptions that offer the best value for money and make your points go further.
- Take advantage of other extras. Points are usually just one part of the package when you get a reward credit card. You can also get more value out of extras such as complimentary insurance, airport lounge access or dining programs. Check out these features and try to use them as much as possible to help make your card work for you.
If you don’t think you are getting good value out of a rewards card, you may also want to consider switching to a credit card that doesn’t have rewards but offers a lower ongoing interest rate or annual fee that could save you money on the actual cost of using a card. Many of these cards also come with complimentary extras that add some value, without the high costs associated with most reward credit cards.
The important thing to remember is that credit cards should be affordable and convenient for you. So if the reward card changes that come into effect this year take value away from you, then it might be time to look elsewhere. Rather than sticking with a card that makes you work hard for benefits, find an option that works for you.