American Express has restructured its rewards schemes with the result that most of its credit cards will accrue fewer points per dollar, leaving cardholders worse off.
The credit provider announced the changes late last year and they came into effect on 15 April. Amex is cutting the earn and redeem rates across a number of its rewards credit cards in line with other changes that other card issuers have made in recent times.
Consumers need to review their card options and take note of the applicable changes to get the best value.
With Amex’s own Membership Rewards program, card holders will likely need to use more points to redeem the same rewards. This includes when exchanging points for frequent flyer points with partners like Velocity and Qantas.
Insights manager at Finder, Graham Cooke says: “The actual air mile points are worth the same on their affiliated cards but there has been some loss of value in the American Express credit card rewards program when the points are being exchanged for airline partners.”
There is good news for cardholders that have American Express’ two most popular cards, the Explorer and Essentials cards, as there is a slight increase on earn rates.
For the Explorer, the reward is now 1 point per dollar on government transactions and for the Essentials is has increased to 1.25 points per dollar spent and 1 point on government transactions.
Additionally, Amex has flattened the tiered points structure on the majority of cards which makes it easier for consumers to understand the points they will earn on transactions and they can now earn an unlimited amount of points. There will be no limit to the number of points that cardholders can earn.
The Platinum card had four tiers with earn rates ranging from 3 points per dollar to 0.5. In the new scheme there are two tiers that range from 2.25 to 1 on that card.
According to Cooke, if consumers are looking for the best frequent flyer cards, they should look for a card that earns at least 1 frequent flyer point per dollar but it is important to note that the more points earned for each dollar will likely mean that there is a higher annual fee on the card.
The changes are in light of the Reserve Bank of Australia’s decision to cap interchange fees at 0.80 per cent. These are fees that banks, card companies and payment companies charge each other for sending payments through the system.
Interchange fees pay for most of the cost of rewards programs, so when those fees go down the value of rewards go down as well. Amex is not subject to all the changes in regulations but they have followed the other players in the market that have dropped the value of their rewards.
In addition, Amex has reduced its merchant fees to generate wider acceptance. According to Finder this has resulted in more than 120,000 new merchants accepting its cards.
It was only on 1 April that ANZ reduced the number of frequent flyer points that customers can earn on credit cards. The changes to minimum spend and points earned apply to ANZ Rewards, ANZ Rewards Platinum, ANZ Rewards Black, ANZ Frequent Flyer, ANZ Frequent Flyer Platinum and ANZ Frequent Flyer Black cards.
Cooke says: “Overall the value in terms of reward bonuses is going down across the market but there is still fairly decent bonuses points on sign-up packages that haven’t been affected. While the value is slightly less, there is value to be had.”
Consumers have reacted to this loss of value in rewards by using credit cards less and relying more on debit cards. The number of credit cards in Australia peaked in May 2017 at over 16.7 million and has fallen to 15.8 million.
The decrease in credit cards can also be attributed to the buy now pay later services such as Afterpay and Zip, which are mainly targeted at and used by Millennials. They provide interest-free payment plans at the till and remove the need for Millennials to apply for a credit card at all.
Finder’s Cooke says: “The buy now pay later services are not going to be a product that people will drop their credit cards for but young people can access that and don’t necessarily need to take out a credit card.”
Another factor contributing to the decline in credit cards is the appeal of the modern day debit card which are more easily accessible than they have been before and come with a lot more bonuses. The ING Everyday account is a debit card that has no fees, no ATM fees overseas and refunds the locally charged fee if money is taken out internationally.
The current best deals across low rate, rewards and frequent flyer credit cards are listed below:
Frequent Flyer – for consumers seeking a credit card that will allow them to redeem points for flights.
Qantas Premier Platinum credit card
- 70,000 bonus Qantas Points when spending $3,500 in the first 90 days;
- additional 30,000 bonus Qantas Points are paying the second year annual fee; and
- $299 annual fee.
Low Rate – for consumers looking for a credit card with a low interest rate.
ME frank credit card
- $0 first year annual fee;
- 99 per cent purchase rate; and
- interest free period up to 55 days on purchases.
Rewards – for consumers seeking a credit card that provides optimal reward points for everyday spending.
Citi Rewards Platinum Credit Card
- 100,000 bonus points;
- an annual fee of $49 for the first year then $149 thereafter; and
- 99 per cent purchase rate.