A review of interchange fee regulation was made by Money Magazine’s Effie Zahos, spelling out many new changes including the end of credit card rewards programs. This is no surprise given the significance of interchange fees in providing revenue for banks and upholding the system for credit and debit card transactions.
More and more retailers in Australia are turning to credit and debit card transactions, alongside cash payments, in order to reach a far greater number of people. This is great news for buyers and sellers alike, but one must also keep in mind the costs behind more convenient payment methods and their respective rewards programs. This is where interchange fees, a small percentage charged by banks to retailers for every transaction by card, become so essential in holding up the entire system.
Changing the law on interchange fees will not come without a price. What may seem like a simple and straightforward regulation will in effect, alter the current payments structure that benefits consumers and retailers alike. Effie Zahos from Money Magazine notes that ‘reducing the revenue that funds the rewards … could be the death of rewards credit cards generally.’ Some of these include:
- Cutting the ANZ Rewards Visa from 1.5 to 0.75 for every $1 spent
- Raising the redeeming price of a bank's $50 gift voucher from $9800 to $10,700
- Introducing caps on points earned across Citibank, Virgin Money and Macquarie Bank
- Massive reduction on frequent flyer programs
Yet some retailers who don’t understand the importance of interchange fees see it as an unnecessary additional cost and are going along with the RBA’s decision to impose a cap on interchange fees from the 1st of July 2017. This regulation means banks are prohibited from charging retailers more than 0.5% on average and 0.8% will become the absolute maximum. The RBA’s new law would be irrespective of industry and type of product sold. Premium credit cards that were once charged with a 2.2% interchange fee will now be standardized with a far lower fee similar to that of an eftpos or debit card card.
It’s not too late to make your voice and stop these regulations from taking effect next year. Sign our petition and stay updated as we continue to fight for our everyday rewards programs.