Westpac to water down card reward schemes

Westpac is the latest bank to water down its credit card rewards. Photo / Valentin Russanov

Westpac New Zealand is to water down its credit and debit card reward schemes from February next year - the latest bank to make the move in the wake of the Government’s cap on interchange fees, the fees merchants pay for payment services.

Westpac customers with an Airpoints Mastercard currently earn 1 airpoint dollar for every $130 spent on the credit card on purchases up to a cap of $60,000. But under the changes they will only earn 1 airpoint dollar for every $150 spent for the first $3500 of purchases in a month. For spending over $3500 they only earn 1 airpoint dollar for every $300 spent.

Those who have a Westpac Airpoints debit card will have to spend $300 to earn 1 airpoint dollar up from $250. While hotpoint Mastercard users will earn 1 hotpoint for ever dollar spent up to $3500 and then half a hotpoint for every dollar spent instead of a dollar-for-dollar earn rate up to a cap of $60,000.

Westpac NZ chief product officer Kerry Conway said the bank was moving to a new tiered system for its consumer credit card rewards following regulatory changes.

Last month a new law came into effect capping interchange fees with the credit interchange fees cap now set at 0.8 per cent, in line with fees charged in Australia, and the fees for online debit transactions capped at 0.6 per cent.

Merchant service fees are the fees paid by retailers to accept credit cards and some debit card payments. The major cost component of any merchant service fee is the interchange fee. This is the charge from the retailer’s bank to the customer’s bank for processing the payment.

Many shops choose to pass this fee on to consumers for using credit cards or payWave, resulting in higher prices.

It is hoped that this practice will end, or the passed-on fees will be lower, thanks to the legislation.

Conway said although income from these fees had decreased, the bank was not passing on the full cost to its cardholders.

“Instead, most of the cost of this change is being absorbed by Westpac.”

Conway said existing reward earn rates would stay locked in until the end of January 2023.

“We have held off making the change until early next year, which means cardholders will be able to earn rewards at the rate they’re currently on through the Christmas and New Year holiday period.”

Westpac’s move follows that of other banks.

In October Kiwibank announced changes to its credit card rewards scheme which came into force on November 1.

Those on the Kiwibank Low Fee Visa now have to spend $200 for 1 Airpoints Dollar - $40 more than prior to the change and the account fee (every six months) also increased from $12.50 to $25.

Its Standard Visa Airpoints Dollar earn rate increased from $120 to $200, while the account fee (every six months) dropped from $32.50 to $25.

While Kiwibank’s Platinum Visa Airpoints Dollar earn rate increased from $85 to $115 spend, with the account fee (every six months) rising from $75 to $90.

ANZ also changed its cashback earn rates from October 29.

However ASB announced plans to downgrade its credit card rewards scheme in September, only to backtrack the following day after receiving customer feedback.

Gemma Rasmussen, head of communications and campaigns at Consumer NZ, told the Herald in October that many credit card holders could expect a decline in rewards as a result of the regulation change that will see merchants paying a lot less to the banks.

“It’s worth anyone with a rewards credit card taking a cold hard look at what their points are equating to in dollar value and considering whether it will continue to deliver value. While chasing points can be tempting, many rewards credit cards come with an annual fee and lofty interest rates if you miss a payment,” she said.