NAB slashes rewards points in major credit card shake-up

11 October 2017 3:52 PM

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NAB has taken the knife once again to the value of its reward points on its credit cards. The bank will soon no longer offer American Express companion cards and from February 21, 2018, NAB American Express Cards can no longer be used and customers told to "cut up" the cards.

NAB's latest changes follow a swathe of cuts to credit card rewards programs from the major banks, Lamont says.

"In March this year, ANZ became the first big bank to completely scrap the dual card account," she says. "Westpac retained its American Express card but significantly lowered its earn rates, while the Commonwealth Bank moved to slash higher Amex earns rates unless overseas, or at specific merchants," Lamont says.

Even before the latest move by NAB, Mozo estimated there had been a decrease in rewards credit card value of 63 per cent during the past 12 months. The average rewards cardholder is now spending $19,000 to earn just $27 in rewards.

The big banks blame the cuts on interchange fee regulations introduced by the Reserve Bank that took effect from the middle of this year.

CBA has responded to criticisms of over credit cards saying it will introduce a new credit card with a purchase interest rate of 9.9 per cent. Its current lowest rate card is 13.24 per cent.

From November, all CBA's credit card holders will be able to receive alerts through the CommBank App reminding them that a credit card payment is due.

And from mid-2018, credit card holders will be able to pay-off their credit card debt in fixed monthly instalments.

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While the big banks have recently removed or soon will remove their ATM fees, consumers are paying almost twice as much in credit card fees even as the value of rewards points falls.

A report earlier this year by comparison site Finder estimated that Australians fork out nearly $800 million-a-year in ATM withdrawal fees.

ZipMoney, a provider of 'buy now, pay later' digital wallets, used its own data and Reserve Bank figures to estimate that Australians are paying about $1.5 billion in total credit card fees, or almost twice that of ATM fees.

The big banks blame the cuts on interchange fee regulations introduced by the Reserve Bank that took effect from the middle of this year.

Over the past 20 years, credit card fee revenues for Australian financial institutions have increased from $125 million in 1997 to $1.5 billion in 2016, an annual growth rate of 15 per cent.

Credit card holders are hit with fees for cash advances, late payments, drawing more than their credit limit, account keeping, transfers and even fees for being a joint card-holder.

The ZipMoney analysis of 19 financial institutions finds the biggest fee category is for international transactions, which makes up almost 40 per cent, or $600 million, of the $1.5 billion in credit card fees.

The fees are incurred when travellers use their credit card to pay for something when they are overseas or buying goods from overseas.

The ZipMoney analysis estimates credit card holders shell-out almost as much in annual fees. Cards with the highest annual fees are usually those with rewards points.

The ZipMoney analysis shows Sydneysiders paid the most in credit card fees in 2016 of $311, on average, followed by Brisbane at $303, and Perth at $302. Melburnians paid $277 in fees.

Brisbane credit card holders pay the most in international transactions fees, at $89, and pay the most in cash advance fees.

The credit card holders of Adelaide are the most frugal in terms of overall credit card fee spend, but Canberra-based card holders incur the lowest cash advance fees.

Card holders in Perth and Sydney opt for credit cards with higher annual fees, at $99 each.

Andy Mitchell, ZipMoney's chief of growth and innovation, who produced the research, says the pace of revenue generated by credit card fees nationally has moderated in the past five years as consumers become more discerning around the use of credit cards.

He says there has also been a decline of the average interest-accruing balance, dropping from $2500 to $2000 during the past five years.

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