Lower Bank interchange fees to 'enhance' credit card earn rates

[Nutcase]

Re: Interchange regulation will lower Visa and MasterCard Points Earn in 2016

I've been doing more reading. It also appears that the 50bps weighted average cap is now going to be including foreign cards as well which will lower the effective weighted average cap.

I.e. if a premium or super premium US cardholder comes to Australia, the interchange applicable on that product will be taken into account when calculating the 50bps weighted average cap; effectively lowering it given Australia's 80bps cap.

It's definitely not looking good for strong Visa/MasterCard rewards cards in 2016!

Definitely get onto an Amex Proprietary. That blog has some sign-up offers, also seen some on here.

Yes, A proprietary AMEX card (and your Qantas cash card for domestic use) would be ideal if you want a low domestic fee option.

What ever card you use overseas or use for any "foreign" transaction has an interchange of around 2% depending on the geography and the scheme. The "foreign" trigger over rides the card type. They are very sneaky these card schemes.

No matter what scheme card type a tourist uses here in Australia, foreign interchange is applied and isn't included in the wholesale weighted average so its 2% (ish) whether its a gold, debit, platinum or travel card which is a negative for tourism and also encourages DCC so that the merchant can claw back some of the fees charged for tourists using their foreign card. Visa blocked DCC for some time however they have relented. Its a dirty game this card game and everyone pays except the schemes, the banks and Qantas.

Citibank plus debit card is a classic example and why travel cards are so popular with banks. They may be cheap rechargeable (or debit) cards here in Australia (or wherever it is issued) but once you use them overseas its a windfall for the issuer not only from interchange perspective (2%) but from ancillary fees, ATM fees and holding the float. They are toxic consumer products and you need to chose the card you use overseas very carefully as most of the informed people on this board already know.

The RBA is making the schemes squirm. Capping interchange at 0.80% is really starting to level the field. Keep in mind that the RBA have always wanted (and still want) interchange at zero.

 

[Isochronous]

Re: Interchange regulation will lower Visa and MasterCard Points Earn in 2016

Interchange fee regulation is ridiculous government overreach that should be opposed. That's why I'm supporting the Don't Pass the Buck campaign to oppose these outrageous proposals.

 

[Nutcase]

Re: Interchange regulation will lower Visa and MasterCard Points Earn in 2016

Interchange fee regulation is ridiculous government overreach that should be opposed. That's why I'm supporting the Don't Pass the Buck campaign to oppose these outrageous proposals.

Thank you President Trump

 

[newcomic]

Re: Interchange regulation will lower Visa and MasterCard Points Earn in 2016

It's true the RBA does want interchange to be 0. Their rationale is fair, innovation and exponential growth in cards has occurred in markets without interchange and has also occured in Australia on products such as Classic. The RBA suggests that interchange is being used to only fund rewards and not further innovation.

 

[wxxnxs]

Re: Interchange regulation will lower Visa and MasterCard Points Earn in 2016

The only thing RBA should do to fix this problem is to make credit card surcharges illegal!!!

 

[newcomic]

Re: Interchange regulation will lower Visa and MasterCard Points Earn in 2016

The only thing RBA should do to fix this problem is to make credit card surcharges illegal!!!

The RBA pretty much has done that. They have enlisted the help of the ACCC to police surcharging above the 'cost of acceptance'. 2016 onwards will see lower surcharges for all which is great news for Visa/MasterCard holders. Unsure what this means for Amex.

 

[opusman]

Re: Interchange regulation will lower Visa and MasterCard Points Earn in 2016

The only thing RBA should do to fix this problem is to make credit card surcharges illegal!!!

The RBA are the ones who enabled credit card surcharges in the first place.

 

[Isochronous]

Re: Interchange regulation will lower Visa and MasterCard Points Earn in 2016

It's true the RBA does want interchange to be 0. Their rationale is fair, innovation and exponential growth in cards has occurred in markets without interchange and has also occured in Australia on products such as Classic. The RBA suggests that interchange is being used to only fund rewards and not further innovation.

Interchange fees should be set by the market, free of interference by the bureaucratic bozos at the RBA. Nobody is forced to pay anything with a CC, nor are merchants forced to accept CC.

 

[Doctore1003]

Re: Interchange regulation will lower Visa and MasterCard Points Earn in 2016

Interchange fees should be set by the market, free of interference by the bureaucratic bozos at the RBA. Nobody is forced to pay anything with a CC, nor are merchants forced to accept CC.

Except the market fails to deliver equitable outcomes. The whole point of the regulation is to reduce the cost for consumers who don't use cards or use non-premium cards, which won't happen otherwise. You should recognise what the role of cards is in today's economy, and how the costs are incurred and passed on. Not to mention the fact the RBA is a very solid institution doing a lot of good work.

 

[opusman]

Re: Interchange regulation will lower Visa and MasterCard Points Earn in 2016

The whole point of the regulation is to reduce the cost for consumers who don't use cards or use non-premium cards, which won't happen otherwise.

How are things in cloud-cuckoo land these days?

All that card surcharges delivered was higher prices for people using cards.

 

[incumbent]

Re: Interchange regulation will lower Visa and MasterCard Points Earn in 2016

How are things in cloud-cuckoo land these days?

Dude, send us a postcard.

 

[Doctore1003]

Re: Interchange regulation will lower Visa and MasterCard Points Earn in 2016

How are things in cloud-cuckoo land these days?

All that card surcharges delivered was higher prices for people using cards.

Have you read the RBA consultation papers? Would be interested in your coherent and well-thought through analysis if you have one.

 

[Isochronous]

Re: Interchange regulation will lower Visa and MasterCard Points Earn in 2016

Except the market fails to deliver equitable outcomes. The whole point of the regulation is to reduce the cost for consumers who don't use cards or use non-premium cards, which won't happen otherwise. You should recognise what the role of cards is in today's economy, and how the costs are incurred and passed on. Not to mention the fact the RBA is a very solid institution doing a lot of good work.

Every payment method has a transaction cost. It is false to say that cash is a cost-free payment method, or cheque for that matter.

 

[N860CR]

Re: Interchange regulation will lower Visa and MasterCard Points Earn in 2016

I'd really love to see how things would turn out if we all stopped using credit cards on the same day and reverted to cash... I'm sure there'd be a "cash surcharge" pretty quick y

 

[Nutcase]

Re: Interchange regulation will lower Visa and MasterCard Points Earn in 2016

Interchange fees should be set by the market, free of interference by the bureaucratic bozos at the RBA. Nobody is forced to pay anything with a CC, nor are merchants forced to accept CC.

Thats good in theory however the RBA's position is that MasterCard and Visa have engaged in cartel behaviour and have manipulated the market. If you look at the USA and the law suits there, the evidence is in favour of this position. The RBA also didn't like the "no surcharging" rule and the "honour all cards" rules that the schemes had so they were abolished as part of the original overhaul in 2000.

If there are a number of competitors in the market then getting the market to set the price works, however like the duopoly we have with supermarkets the schemes have a lot of power plus there are only 4 major banks in this country. It makes manipulation a lot easier.

Have a read of this piece from the USA about Walmart.

Wal-Mart sues Visa for $5 billion over card swipe fees | Reuters

 

[opusman]

Re: Interchange regulation will lower Visa and MasterCard Points Earn in 2016

Have you read the RBA consultation papers? Would be interested in your coherent and well-thought through analysis if you have one.

All the many years of card surcharging have produced is higher prices for people using cards. That's my analysis.

 

[basso]

Re: Interchange regulation will lower Visa and MasterCard Points Earn in 2016

All the many years of card surcharging have produced is higher prices for people using cards. That's my analysis.

Which was somewhat the intention. Provide price signals that a card was a more expensive option than cash. One of the outcomes is that it has kept a bit of a lid on merchant fees.

 

[opusman]

Re: Interchange regulation will lower Visa and MasterCard Points Earn in 2016

Which was somewhat the intention. Provide price signals that a card was a more expensive option than cash. One of the outcomes is that it has kept a bit of a lid on merchant fees.

Unfortunately they completely failed to predict the ubiquity of online shopping, booking and payment systems, which practically make using cash impossible in most situations. What's the point of "price signals" when there is no alternative to choose?

 

[newcomic]

Re: Interchange regulation will lower Visa and MasterCard Points Earn in 2016

I saw today that ANZ had taken away 1 million Points from a customer who had incorrectly been using their personal card for business expenses. It's not surprising they would have done this under the old interchange hierarchy given commercial and business used to earn a lot more than most consumer products. But under the new regime, I wonder what the incentive for ANZ would be to penalise the customer. It seems like a fruitless expertise if the max interchange they can earn on either product is 80bps. Thoughts?

 

[exceladdict]

Re: Interchange regulation will lower Visa and MasterCard Points Earn in 2016

Realistically Qantas needs to reduce the costs of its points.

That sentence scares me on so many levels.

Except the market fails to deliver equitable outcomes. The whole point of the regulation is to reduce the cost for consumers who don't use cards or use non-premium cards, which won't happen otherwise. You should recognise what the role of cards is in today's economy, and how the costs are incurred and passed on. Not to mention the fact the RBA is a very solid institution doing a lot of good work.

The RBA is solid institution, but have also copped their fair share of criticism. Refer to Macrobusiness for some very good economic analysis, who aren't afraid to dish it to Mr. Stevens.

Furthermore the market does deliver equitable outcomes. Look at people flocking to alternative payment methods (bitcoin, paypal, etc). Look at the shops refusing to accept card because it's too expensive, but still winning customers because of their awesome value proposition (eg. good coffee in Perth that's not $7). Look at consumers deliberately manipulating the system to make bulk points. Look at the card companies making money, because they can. People are buying their products, no one is forcing them to. The market is innovating, through things like paywave, reloadable travel cards, etc with different costs and payment structures attached.

If businesses can make money off people who are uninformed, by choice or otherwise, it is far from the government's role (nor a supposedly independent monetary governance institution's role) to regulate.

Every payment method has a transaction cost. It is false to say that cash is a cost-free payment method, or cheque for that matter.

Bingo. But if you wanted to only pay cash, there are very few circumstances where you could not, in some form or another. The choice is there.

I saw today that ANZ had taken away 1 million Points from a customer who had incorrectly been using their personal card for business expenses. It's not surprising they would have done this under the old interchange hierarchy given commercial and business used to earn a lot more than most consumer products. But under the new regime, I wonder what the incentive for ANZ would be to penalise the customer. It seems like a fruitless expertise if the max interchange they can earn on either product is 80bps. Thoughts?

The incentive is a customer has bent the rules to obtain a benefit the bank can get out of paying. It's the same as a retailer refusing a change of mind refund. It's within their rights to turn away an unwanted cost.

The last thing we should see is a government setting a price ceiling on anything other than life-dependent utilities. And even then, there's a good argument to leave it to the market.