Why Are Credit Cards Moving to Monthly Fees?

In 2020, CommBank Ultimate Awards became one of the first Australian credit cards to introduce a monthly fee instead of the more traditional annual fee. This card offers a $35 monthly fee that CommBank waives each month that you spend over $4,000 on the card.

CommBank has since moved all its other personal credit cards across to monthly fees as well. Other Australian banks are starting to follow suit.

This month, for example, NAB relaunched its NAB Rewards Signature credit card with a range of changes including the removal of international transaction fees. Another change was the switch from a $295 annual fee to a $24 monthly fee. That’s equivalent to $288 per year, although the monthly fee will be waived whenever you spend at least $5,000 in the month.

The new Westpac Lite credit card also has a monthly fee ($9 per month), as does the new Amex Essential Rewards card. The Essential Rewards, which also has some rather interesting bonus point-earning categories, has a $9 monthly fee ($108/year).

Why are banks moving to monthly fees?

The switch from annual to monthly credit card fees is starting to become a bit of a trend. Why?

Businesses typically prefer that customers purchase annual rather than monthly subscriptions, as that way they receive the full year’s worth of revenue upfront. But there are a few reasons why monthly fees could work better for some banks.

Firstly, some potential customers might be put off by a high initial annual fee that they have to pay upfront. Breaking the fee down into smaller monthly payments could make the product more attractive to some consumers.

Secondly, this could also reduce the number of people who cancel their credit cards just before the next annual fee is due.

There could be other reasons as well.

Monthly fee waivers in exchange for card spend

Interestingly, many of these new cards waive the monthly fee during each month that a customer spends over a certain amount on the card. This could be a clever strategy to keep customers using the card regularly and as their primary method of payment.

Banks earn revenue from interchange fees whenever someone spends money on their credit card. And the more money someone spends on their card, the more likely the bank will also pick up additional revenue from other fees or charges.

What do you think?

Do you prefer annual or monthly credit card fees? Let us know on the Australian Frequent Flyer forum:

Matt Graham

The editor of Australian Frequent Flyer, Matt's passion for travel has taken him to over 80 countries… with the help of frequent flyer points, of course!
Matt's favourite destinations (so far) are Germany, Brazil & Kazakhstan. His interests include economics, aviation & foreign languages, and he has a soft spot for good food and red wine.

You can connect with Matt by posting on the Australian Frequent Flyer community forum and tagging @AFF Editor.