Credit card rewards programs in firing line as banks recoup surcharge change costs | The Business

Banks are winding back rewards programs and insurance perks offered on credit cards, as they prepare for the biggest changes to payments in years.

From Thursday, businesses will be banned from adding a surcharge to customers using electronic terminals to pay for goods on card networks including EFTPOS, Mastercard and Visa.

The cap on interchange fees paid by Australian businesses to banks for processing credit card fees will reduce from 0.8 per cent to 0.3 per cent, meaning businesses will pay lower fees but bank revenues will take a hit.

In preparation for these changes, the major Australian banks are increasing credit card fees, reducing reward program perks and cutting back on travel insurance inclusions.

The surcharge ban is expected to save consumers about $1.6 billion and businesses $200 million in surcharge fees annually.

Canstar’s data insights director, Sally Tindall, said it was clear the banks were not willing to wear the reduction in interchange fees. “They’re looking to recoup at least some of that loss … the consumer, in many cases, will end up paying for part of this ban at the minimum, but also small businesses.”

But Australian Banking Association (ABA) chief executive Simon Birmingham said the changes implemented by the banks were expected. “That was one of the things that the Reserve Bank called out as not only expecting to see, but basically wanting to see,” he said.

The almost one in six businesses that surcharge have until October 1 to make the necessary changes, and some are worried. Australian Restaurant and Cafe Association chief executive Wes Lambert said many businesses were considering their options. “Many have indicated that they are going to increase their prices … Many have also told us they are going to stop taking certain credit card types and many have said that they’re going to go to cash only,” he said.

Despite the additional charging that may happen, the RBA’s head of payments policy, Ellis Connolly, said he did not expect the reforms to have an ongoing impact on inflation. “In the end, the consumer was paying it either way, whether it was paid in a surcharge or whether it was paid in the end price,” he said.

Subscribe: http://ab.co/1svxLVE

Note: In most cases, our captions are auto-generated.

#ABCNEWS #ABCNEWSAustralia #ABCBusiness