Are credit card rewards schemes worth it?
Credit card reward schemes are likely to be scaled back further as pressure goes on interchange fees, Consumer NZ says, but most aren't delivering value for many New Zealanders, anyway.
On Tuesday, Kiwibank and Air New Zealand announced they were cutting ties and Kiwibank would no longer offer an Airpoints credit card.
Kiwibank pointed to increasing regulation of interchange fees, which are the fees paid by the bank that processes a transaction to the card issuer.
The Commerce Commission has already introduced new standards to reduce these fees, which led to a reduction in some credit card rewards in 2022.
More reductions are expected to be announced soon, to come into force at the end of the year.
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Consumer NZ said its analysis showed that credit card reward schemes were only benefiting big spenders who used their cards frequently and paid off the balance in full every month.
People would generally need to spend $25,000 on their cards over two years, and not pay interest on it, to make a rewards scheme worth the fees that the cards charged.
"Low spenders, and those with interest-bearing debt, don't benefit from rewards and are effectively subsidising high spenders. We don't think this is fair so we have supported the regulation of interchange knowing this would likely result in card issuers scaling back rewards programmes, increasing card fees or cancelling schemes altogether," a spokesperson said.
"Interchange regulation will also reduce the cost for merchants of accepting card payments. This should, in theory at least, result in lower card payment surcharges for consumers. Unfortunately there's no guarantee these savings will be passed on to consumers though so we have been calling for surcharge regulation for a number of years. The commission is expected to consult on this later in the year."
Banking expert Claire Matthews, of Massey University, said it was to be expected that rewards schemes would be pared back as interchange fees reduced.
"Although it does depend on the level at which they are capped and how that is split between the parties. However, those fees have been a key source of the revenue to fund the rewards so any reduction can be expected to be passed on."
rnz.co.nz
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