Mind the (Points) Gap

Somewhere in your wallet, sitting patiently in a bank app you don’t often open, there's a number that's about to shrink. While you’ve swiped a personal credit card and watched points pile up (CommBank Awards, ANZ Rewards, Westpac Altitude, Amplify) the conversion rate is worth more right now than it will be after 1 October.

After that, it's still your money. It just won't buy what it does today.

Here's the short version, if you want to stop reading and go act on it: move your bank points across to your frequent flyer account NOW - Qantas, Velocity, whoever you fly, before the end of this month. Once they land there, no bank can touch them again. They’re laundered, as it were. Do that now and I’ll explain why later.

The Corporate Travel Change

But what I want to “point” to first is an even more interesting change for corporate buyers and travellers.

Here, there’s a bigger story than any bank's fine print. Just as banks are making points harder to earn, Qantas is doing the opposite with status; from 8 December, members will be able to earn up to 140 Status Credits a year through banking, shopping and other partners, not just flying. That's no coincidence. It's a deliberate move by the national icon to make status stickier and easier to earn.

This expands a genuinely intriguing tug-of-war for anyone travelling on a company card.

Over four decades, Qantas has extended its points economy into almost every corner of our everyday life: banking, insurance, energy, shopping, hotels, cars and the rest. What's different now is that it is extending status into that world as well.

Why’s that important? See it this way Points are a currency; status is a relationship. And status, which means lounge access, priority, recognition and the chance to get even higher up the chain (a bit like our Transport Minister), has long been one of the airlines' most powerful tools for capturing the frequent corporate traveller.

Now, some of that status will effectively be earned on the ground. That potentially makes the airline's hold over the corporate traveller stronger, not weaker, even as the traditional bank-funded points economy comes under pressure.

The employer sets the travel policy and pays the bill. The bank controls the card and the transaction data. The airline controls status, recognition and the relationship with the traveller themselves. So, as bank points get squeezed and airline status gets easier to accumulate regardless of how often someone actually flies, the question of whose loyalty program really has the traveller's attention - the company's, the bank's, or the airline's - is about to get a bit more interesting. The airlines have become masters at capturing corporate flyers; the battle for control now gets that bit hotter.

The Interchange Fee Change

But back to the reason all this is happening. It’s down to the Reserve Bank, not the banks themselves. The RBA has been trying for years to bring down the hidden cost of using a credit card, the “interchange fee” that banks charge merchants every time you tap to pay. It’s basically been a rort since we stopped using cash (made even worse because it’s actually cheaper for banks to process cards; cash means handling costs).

From 1 October, that fee cap drops from 0.8% to 0.3%, and from then businesses won’t be allowed to slap a separate surcharge on your Visa, Mastercard or EFTPOS transaction to cover it. For shoppers, that's a genuine win: cheaper coffee, cheaper everything, no more surprise 1.5% fee at checkout (even if they do try to get away with it).

But nothing ain’t free, and the money for those reward points was always coming from somewhere. Specifically, it was from the margin that banks made on interchange. Squeeze that margin and the banks lose the pool of cash they've been using to fund your points. So they're doing exactly what you'd expect: cutting back what they hand out. Lower earn rates per dollar spent, lower monthly caps, smaller sign-up bonuses, and… the part that actually matters for anyone sitting on a points balance right now, a worse exchange rate when you transfer bank points into an airline program.

The banks aren't shy about it, either. Westpac is cutting its Altitude transfer rate to a flat 4:1 for Velocity, Singapore Airlines and Cathay Pacific from 30 September, down from a noticeably better rate today.

CommBank is retiring its Awards programme altogether, folding customers into a new “Yello” points scheme, and quietly moving its Velocity conversion from 2:1 to 2.5:1, its Qantas conversion from 2.5:1 to 3:1, and adding a $99 fee just to make the Velocity transfer. Virgin Money is slashing its High Flyer card's earn rate from 1 point per dollar down to as little as 0.25. NAB and ANZ haven't picked a catchy rebrand, but they're making the same cuts under the cover of routine disclosure updates.

The good news, if you can call it that: points already sitting inside an airline account are completely insulated. Qantas and Velocity set their own rules, and those don't change because your bank's economics did. So, the entire risk lives in that gap between “in your bank app” and “in your frequent flyer account”. And once you close that gap, you're safe.

There’s one important exception: American Express is exempt from the RBA's interchange cap, so Amex earn-rates and their surcharge-free status aren't changing on 1 October. Amex is different because it signs up both the merchant and the card holder, avoiding the need to use two banks. That would make some smaller traders reluctant to accept Amex, because they’d have to pick up the fee; so, to lock in its advantage, Amex is voluntarily dropping its charge to the merchant.

Anyway, in short, if you haven’t moved your points over, do it NOW…