Why other banks are likely to follow the credit card rewards ASB downgrade


ASB announced Thursday that the amount its ASB Visa Rewards cardholders must spend to earn each of its True Rewards points will increase on October 4 from $150 to $275.

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ASB announced Thursday that the amount its ASB Visa Rewards cardholders must spend to earn each of its True Rewards points will increase on October 4 from $150 to $275.

ASB has American Express’ exclusive metal cash card with annual fee of $1,250

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“> cut the value of its credit card rewards program, but it could be the first of the big banks to do so.

On November 13, caps on merchant fees, which retailers must pay to accept credit card payments from customers, come into effect.

Retailers and hospitality businesses welcome the caps, but Retail NZ chief executive Greg Harford said credit card rewards were funded by the fee, which meant other banks could also change their schemes of rewards.

ASB announced Thursday that the amount its ASB Visa Rewards cardholders must spend to earn each of its True Rewards points will increase on October 4 from $150 to $275.

READ MORE:
*American Express’ exclusive metal cash card has an annual fee of $1,250
* Coronavirus: How do we still No Paywave?
* Trade Minister Kris Faafoi warns Visa and Mastercard not to raise fees

People with its more exclusive Visa Platinum Rewards card will have to spend $170 to earn every True Rewards dollar, up from $100 previously.

The bank didn’t explain the move, but Harford said, “The very high interchange rates charged to merchants have funded the rewards programs, so it wouldn’t surprise me if the banks looked at their rewards programs before November. “

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David Clark, Minister for Trade and Consumer Affairs, explains in May why the government has decided to cap the fees merchants have to pay to accept credit card payments.

Retailers in New Zealand pay far more than retailers overseas to accept credit cards, and Retail NZ led the fight to get the government to intervene, arguing that banks and credit card companies had no no incentive to reduce them.

He launched a high-profile report in 2015 to launch his campaign.

Retail NZ succeeded, and in May Parliament passed the Retail Payments System Act to cap fees.

Harford said retailers pass on high merchant fees to their prices.

This meant that the high spenders who benefited the most from credit card reward programs were effectively subsidized by the lower spenders, including the poorest households.

“It’s actually worse than that,” Harford said.

Retail NZ chief executive Greg Harford says credit card rewards programs have been funded by high fees for merchants, but from November 13 a law comes into effect reducing merchant fees .

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Retail NZ chief executive Greg Harford says credit card rewards programs have been funded by high fees for merchants, but from November 13 a law comes into effect reducing merchant fees .

“Ultimately, the costs are reflected in everyday prices, so the mythical little old woman from Ruatoria who doesn’t have a credit card subsidizes premium rewards programs.”

The November 13 price caps would be anti-inflationary, he said.

A survey by the Restaurant Association, a lobby group for the hospitality industry, revealed business owners’ anger at merchant fees being so high.

He said 99.26% of members agreed or strongly agreed that merchant fees should be regulated, and 69% of them said they would prefer direct regulation.

The Covid pandemic led many consumers to favor contactless payments, which initially drove up merchant costs, prompting banks to temporarily reduce or even waive fees.

ANZ would not discuss whether it was reviewing its credit card rewards programs.

An ANZ spokeswoman said that due to disclosure and customer notification obligations, she was hesitant to comment on the planned changes at this stage.

A Bank of New Zealand spokesperson said: “We are constantly reviewing our product portfolio and how we reward our customers, but have no changes to announce at this time.”

During the final vote to pass the Retail Payments System Act in May, David Clark, Minister for Trade and Consumer Affairs, said: “It is vital for consumers that the retail payments system is both competitive and efficient.

The Restaurant Association said that from November 13, in-person debit payments will incur no fees for merchants.

Fees on contactless debit payments would be capped at 0.2% of the amount spent, or 5 cents per transaction.

Fees on online debit payments would be capped at 0.6% and credit card interchange fees would be capped at 0.8%.

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