Will you have to pay more to earn frequent flyer rewards with your credit card for 2016?

Information verified correct on October 26th, 2016

RBA cuts stand to reduce the rewards cardholders will earn with frequent flyer credit cards.

Frequent flyer credit card holders may need to fork out more to earn rewards after predictions that cuts made by the Reserve Bank of Australia (RBA) could impact rewards.

Developments with the RBA reforms

This development is a result of the RBA’s reforms to cut credit card fees. These changes aim to abolish the interchange fees banks charge merchants for facilitating card payments, something that could result in revenue losses of hundreds of millions of dollars for the banks. As this revenue is generally used to purchase the frequent flyer points from airlines to reward customers, it’s likely that the rewards you can earn will take a hit.

“The reduction in interchange fees, especially the cap on the highest credit card rates, is likely to result in some reduction in the generosity of rewards programs on premium cards,” the RBA said in a statement announcing the proposed new rules.

What does this mean for frequent flyer credit card users?

Frequent flyer rewards schemes cost the banks more than any other program they offer customers, making them a likely candidate for cuts as banks scramble to retrieve some of the lost revenue. Therefore, it’s likely that the changes could cause millions of Aussie frequent flyer credit card users to receive fewer points per dollar they spend on their credit card.

“For consumers, the biggest change is going to be to the rewards points they can earn per dollar spent,” one senior bank executive told the SMH.

This change could also mean the end of dual cards that offer both American Express and either MasterCard or Visa, with the AMEX card usually raking in a higher earn rate than the former.

The RBA and Australian Competition and Consumer Commission believe that airlines will also be forced to raise surcharges to cover the costs of reduced rewards purchased by banks. So rather than the flat fees currently enforced by Qantas and Virgin, you may have to pay a percentage of your transaction fee when travelling on long-haul flights.

The RBA announced that the surcharges rule could be implemented quickly, while the interchange reforms are likely to be approved by May 2016.

How can I get make the most of my frequent flyer points?

If you’re worried about the points you could lose as a result of the RBA’s proposal, the following are some simple strategies for maximising your points before and after the reforms roll in.

  • Bonus points. If you’re looking for a new frequent flyer credit card, keep an eye out for cards that offer bonus points on signup. Some cards will require you to make an eligible purchase within the first few months to redeem the points, but if you were already going to use your card for purchases, this can be a valuable way to kickstart your points balance.
  • Shop with partners. Some frequent flyer programs will allow you to earn points (or bonus points) when spending with partners. This can include airlines and stores, so check your frequent flyer program’s website to see where you can earn extra points. Learn more about frequent flyer cards here.
  • Redeem wisely. Certain rewards will give you better bang for your buck. For example, if you’re a Qantas Frequent Flyer credit card holder, you’ll need 64,000 Qantas Frequent Flyer points for a one-way economy ticket from Sydney to London worth A$2122.24. For a similar 64,240 points you could redeem a Panasonic AllPlay Wireless Speaker valued at $479.00. In this instance, it’s obvious that you’ll be making bigger savings if you go for flights over rewards from the Qantas Store.

If you have or are in the market for a frequent flyer credit card, you’ll want to keep an eye out for these earn rate cuts. While there are ways to maximise your points, you’ll want to ensure that the cost of your frequent flyer credit card doesn’t outweigh the savings you earn with your frequent flyer rewards.

Compare frequent flyer credit cards to find the right one for you

Sally McMullen

Sally McMullen is a journalist at finder.com.au who is a credit cards and travel money expert by day and music maven by night.

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Credit Cards Comparison

Rates last updated October 26th, 2016
Purchase rate (p.a.) Balance transfer rate (p.a.) Annual fee
Virgin Australia Velocity Flyer Card - Balance Transfer Offer
Enjoy a 0% p.a. balance transfer offer for 18 months and also earn 2 bonus Velocity Points in the first 3 months on everyday spend.
20.74% p.a. 0% p.a. for 18 months $64 p.a. annual fee for the first year ($129 p.a. thereafter) Go to site More info
ME Bank frank Credit Card
Enjoy a low and consistent interest rate on purchases and cash advances, combined with no annual fee.
11.99% p.a. $0 p.a. Go to site More info
HSBC Platinum Credit Card
Receive a full annual fee refund and save $149 if you meet the $6,000 spend requirement. Enjoy a balance transfer offer and platinum card benefits such as complimentary insurances and concierge services.
19.99% p.a. 0% p.a. for 15 months $149 p.a. Go to site More info
NAB Low Rate Credit Card
The NAB Low Rate Card offers 0% p.a. on purchases and balance transfers for 15 months. This card also comes with a low annual fee.
0% p.a. for 15 months (reverts to 13.99% p.a.) 0% p.a. for 15 months with a one off 3% balance transfer fee $59 p.a. Go to site More info

* The credit card offers compared on this page are chosen from a range of credit cards CreditCardFinder.com.au has access to track details from and is not representative of all the products available in the market. Products are displayed in no particular order or ranking. The use of terms 'Best' and 'Top' are not product ratings and are subject to our disclaimer. You should consider seeking independent financial advice and consider your own personal financial circumstances when comparing cards.

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