Opinion
Credit cards perks are being slashed – is yours still worth it?
Nicole Pedersen-McKinnon
Money contributorIt’s not exactly on brand for me in my chosen career, but I’ve long been a credit card fan. Every transaction in my life goes through one – or it did until, on some, fees became inescapable.
Those credit transactions then tactically sit there, unpaid, while my money sits in an offset account against my mortgage for the maximum number of interest-free days.
An interrogation of 65 different credit card providers reveals clawbacks of various benefits over the past decade.Credit: Dominic Lorrimer
I deploy rewards points from said transactions for cheap flights to cut my leisure spending. The complimentary travel insurance gives my family cover for nothing – but no more: card companies seem to be dropping insurance offerings one by one.
Bankwest is the latest to do so on its Zero Platinum MasterCard. It joins Great Southern Bank, G&C Mutual Bank and Regional Australia Bank, which no longer offer the cards that had complimentary insurance in 2023, according to data house Mozo.
Of those still offering cover, exclusive analysis Money shows fewer provide unlimited cancellation cover. In 2023, some 18 providers offered unlimited cover, which has halved to nine. Meanwhile, only 20 offer unlimited medical cover, down from 26 in 2023.
When I contacted Bankwest for this column, a spokesperson said: “Bankwest strives to deliver simplicity and great value for customers, and we want the Bankwest Zero Platinum credit card to remain the best-value card on the market and retain its zero fee structure – with no annual fee, no foreign exchange rate, and a competitive purchase rate.”
If credit cards form part of a smart strategy to use institutional money for free – as they do for me – you now need to be vigilant.
Insurance will end on September 3, 2024. Only if you have purchased an upgrade to your base level will you be covered after that date.
The string of changes to complimentary travel insurance over the past year aligns with a broader shift in the credit card market: devaluation of offerings.
An interrogation of 65 different credit card providers reveals clawbacks over the past decade – including increasing fees, an uptick in interest rates and changes to rewards points. To what extent have these conditions eroded?
On fees, the average annual fee has increased from $111.55 in 2014 to $134.44 in 2024.
On rates, the big four banks have all hiked lately to above 20.99 per cent across a range of cards. CBA upped interest in November last year, ANZ followed in February and NAB in April; Westpac’s new higher settings came into play just Thursday.
The highest rate increase has been from 23.5 per cent in 2014 to 27.49 per cent in 2024.
When it comes to rewards point recalibrations, providers are changing sign-up offers, often by restructuring bonus point offers and splitting rewards over several months with new minimum spending thresholds.
As Rachel Wastell, Mozo’s communications manager, told me: “Essentially, you now need to spend more on your credit card and keep the credit card active for a longer period to be able to accrue points.
“So consumers may be spending more than they would have otherwise, negating the dollar value of these points.”
With existing credit card rewards programs, banks have been introducing points-earning caps on cards that did not have them there before and increasing the points required to redeem rewards.
Why? These are products under pressure, very likely from rival buy now pay later (BNPL) services.
Over half of us (56 per cent) now shop using buy now pay later, with 49 per cent using more than one service, as consumers are drawn to the convenience and interest-free options these platforms provide (revenue comes from merchants and late-payment fees). That’s worrying, and new consumer protections don’t go far enough.
Regardless, it’s being reflected in the country’s cumulative credit card balance now accruing interest, in the latest RBA figures, down 1.2 per cent both year-on-year and month-on-month to $18.2 billion. That part is no bad thing. But as more people turn to alternative sources of credit such as BNPL and credit cards become less profitable, issuers are clearly seeking to recover some lost revenue.
The bottom line for you is that if credit cards form part of a smart strategy to use institutional money for free – as they do for me – you now need to be vigilant: Do they still represent value for the (new) fees?
Because what you were offered, even last year, may not be what you are getting now.
Nicole Pedersen-McKinnon is the author of How to Get Mortgage-Free Like Me, available at www.nicolessmartmoney.com. Follow Nicole on Facebook, Twitter or Instagram.
- Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.
Expert tips on how to save, invest and make the most of your money delivered to your inbox every Sunday. Sign up for our Real Money newsletter.