New RBA Caps on Credit Card Fees Threaten Rewards Value—But a Loophole May Save Them

The Reserve Bank of Australia’s (RBA) recent decision to cap interchange fees on credit card transactions is poised to reshape the rewards landscape for millions of cardholders. While the move aims to reduce costs for merchants and consumers, it risks undermining the value of popular reward programs—unless card issuers and users adapt through a growing loophole: the strategic use of premium cards linked to business spending or international transactions.

Understanding the RBA’s Fee Cap and Its Immediate Impact

In March 2024, the RBA finalized reforms to lower the benchmark interchange fee for credit card transactions from 0.88% to 0.50%—a reduction of over 40%. The change, part of the bank’s ongoing review of the payments system, seeks to align Australia’s fees with global best practices and reduce what the RBA describes as “excessive” costs passed on to merchants and, consumers.

Interchange fees are the charges paid by merchants’ banks to cardholders’ banks whenever a credit card is used. Historically, these fees have funded rewards programs—such as points, cashback, and travel perks—by allowing card issuers to rebate a portion of the income to users.

With the cap now in effect, issuers earn less per transaction, directly squeezing the margins that support generous rewards. According to RBA data, the average Australian credit card holder earns roughly $120 annually in rewards value. Industry analysts estimate that the fee reduction could cut the funding available for rewards by up to 30–40% for standard cards, potentially diminishing earning rates or increasing annual fees to compensate.

“This is a structural shift,” said a payments analyst at Moody’s Investors Service. “Issuers can no longer rely on high interchange income to subsidize rewards at previous levels. The era of unlimited, high-earning cards may be ending—for now.”

The Loophole: Business, Premium, and International Cards

Despite the broad impact, a notable exception exists: the RBA’s cap applies primarily to consumer credit card transactions. Transactions made on business cards, premium cards (such as Visa Infinite or Mastercard World Elite), and those processed outside Australia are subject to different fee structures—or, in some cases, no cap at all.

This distinction has created a loophole savvy users are beginning to exploit:

• Business credit cards: Issued to companies or sole traders, these cards often carry higher interchange fees exempt from the RBA’s consumer-focused cap. Rewards on business spending—such as office supplies, travel, or advertising—can still earn at premium rates.
• Premium personal cards: High-tier cards with annual fees exceeding $300–$700 often negotiate interchange rates above the benchmark, allowing issuers to maintain richer rewards. Examples include the American Express Platinum Card and CommBank Awards Visa Infinite.
• International transactions: When a card is used abroad or for foreign currency purchases, the transaction may fall under international interchange rules, which are not subject to the RBA’s domestic cap.

Data from the Australian Payments Network (AusPayNet) shows that while consumer credit card transaction volumes grew 5.2% year-on-year in Q4 2023, business card spending rose 8.7%, suggesting a shift in usage patterns even before the fee cap took full effect.

How Cardholders Are Adapting

Financial advisors are already guiding clients to adjust their strategies:

• Maximize business spending on eligible cards: Entrepreneurs and freelancers are encouraged to use business cards for deductible expenses, preserving rewards value while simplifying accounting.
• Stack rewards through tiered cards: Some users maintain a mix—using a standard card for daily purchases (to avoid annual fees) and a premium card for high-value or international spending where rewards remain robust.
• Leverage sign-up bonuses and retention offers: Issuers are responding to fee pressure by increasing upfront incentives. As of Q2 2024, several banks are offering bonus points worth $200–$500 for new premium card approvals, effectively offsetting reduced ongoing earn rates.
• Monitor foreign transaction fees: While international purchases may bypass the interchange cap, users must still watch for foreign transaction fees (typically 2–3%), which can erode rewards value if not managed.

Industry Response: Innovation Over Entitlement

Card issuers are not passively accepting margin compression. Major banks—including Commonwealth Bank, ANZ, and NAB—are investing in alternative revenue streams, such as:

• Subscription-based premium features (e.g., airport lounge access, concierge services)
• Partner-driven cashback offers with retailers
• Data analytics services sold to merchants (with user consent)
• Tiered rewards models that tie earn rates to spending thresholds or product holdings

“The reward program isn’t dying—it’s evolving,” said a senior executive at a major Australian bank, speaking on condition of anonymity. “We’re shifting from interchange-funded perks to value-driven ecosystems where loyalty is earned through engagement, not just swipe volume.”

What This Means for the Average Australian

For most consumers, the era of earning 2–3 points per dollar on everyday spending may be ending. Though, the RBA’s reform also brings tangible benefits:

• Lower merchant fees could lead to slightly lower prices over time, particularly in competitive sectors like retail and hospitality.
• Increased transparency in card pricing may encourage better product comparison.
• The push toward innovation could yield smarter, more personalized rewards—such as dynamic offers based on spending habits or real-time redemption options.

the winners will be those who understand the new rules: not just how to spend, but where and how to spend to maximize value under the revised framework.

Key Takeaways

• The RBA’s cap on credit card interchange fees (now 0.50%) reduces funding for traditional rewards programs.
• Standard consumer cards are most affected, with potential declines in earn rates or increases in fees.
• A loophole persists for business, premium, and international transactions, which remain exempt or subject to different rules.
• Savvy cardholders are adapting by aligning spending with exempt card types and leveraging sign-up bonuses.
• Issuers are responding with innovation—shifting from interchange-funded rewards to experience- and data-driven loyalty models.
• While headline rewards may shrink, the long-term outcome could be a more efficient, transparent, and competitive payments system.

Frequently Asked Questions

Will my current credit card rewards be reduced?

Possibly. If you use a standard consumer card for most purchases, your earn rate may decrease or your annual fee may increase as issuers adjust to lower interchange income. Check your card’s terms for any upcoming changes.

Are business credit cards really exempt from the RBA’s cap?

Yes. The RBA’s 2024 interchange fee reforms apply specifically to consumer credit card transactions. Business cards are governed by separate pricing frameworks and are not subject to the 0.50% cap.

Should I switch to a business card to protect my rewards?

Only if you qualify. Business cards require an Australian Business Number (ABN) or equivalent. Sole traders and freelancers often qualify, but using a business card for personal spending may violate terms and risk account closure.

Do premium cards still offer good value despite the fee cap?

Many do—especially if you spend heavily in categories that earn bonus points or travel frequently. The value depends on whether the rewards and perks outweigh the annual fee. Use a rewards calculator to assess your specific spending pattern.

Is the RBA planning further changes to credit card fees?

The RBA reviews the payments system every three years. Its next review is scheduled for 2027, but interim adjustments are possible if market conditions shift significantly. For now, the 0.50% benchmark is set to remain in place through at least 2026.