Banks are clawing back rewards as new credit card fee rules threaten their profits, raising bigger questions about competition, cash and who ultimately benefits from Australia’s card system.

Over the past week or so, most Australians would have received an email notice from their bank announcing “bigger”, “better”, or at best “changes” to their rewards program.

In fact, the banks are on a mission to claw back about $600 million in income they are set to lose because of a Reserve Bank decision to prohibit merchants from charging credit or debit card fees on transactions from October 1.

The Reserve expects merchants to absorb the cost, just like electricity, rent, rates and water, and charge all customers the same price for the same item.

In return, the fees merchants pay to credit-card-sponsoring banks will be capped.

So the banks will take a hit unless they can claw back the lost income in other ways – basically by reducing rewards program benefits and trying to tart up the changes as improvements when, overall, customers will lose.

One of the biggest loss centres for customers will be the change by the Commonwealth Bank, Australia’s biggest bank with 17 million customers, to its Qantas arrangement. Hitherto, every dollar spent on a card automatically converted to Qantas points. Qantas has at least 5.7 million customers. Under the new “better” scheme, you will get fewer Qantas points for every dollar spent and you will have to pay an annual fee of $149 to be in the program.

This is on top of Qantas itself reducing the value of points by increasing the number........

© The New Daily