Money Australia — May 2017

CALENDAR
OF EVENTS

Tuesday, May 9
Federal budget 2017-

Tuesday, May 9
NAB business confidence

Wednesday, May 10
Westpac consumer
confidence

Friday, May 19
Unemployment rate

Rewards under threat

as fees are slashed

Newcreditcardcaptohitlenders’$2bnrevenuestream

O

nJuly1,interchangefees

will officially be capped

by the Reserve Bank at 0.8%,

severely curtailing a $2 billion

revenue source for lenders,

some of which have been charg-

ingupto3%ofthevalueof

credit card transactions.

Interchange fees are charged

byacreditcardissuertothe

retailer’s bank at the point of

sale. A portion goes towards

covering the EFT costs; however,

thefeesareoftenalothigher

than the actual cost.

The new cap could have

repercussions for the millions

ofAustralianswitharewards

credit card. That’s because most

rewards programs are funded

by money collected from inter-

change fees, and that’s all about

to come to a grinding halt.

The credit card market is

already being shaken up in antic-

ipationofthesechanges,with

CBA and Citi announcing they

areparingbacktheirrewards

programs, while ANZ has axed

its joint credit card with Amex.

Come July 1, it’s expected other

lenderswillfollowsuitasthe

revenue stream dries up.

Capping interchange fees is

a win for common sense. For

years, retailers complained

thattheexorbitantfeeswere

ultimately passed onto the

consumer,eitherinexcessive

credit card surcharges or higher

prices. This new cap, along

with the cap on credit card

surcharges introduced last year,

createsamuchfairer,more

transparent playing field.

Anyonewithacreditcard,

however,couldseethevalueof

their rewards program take a

nosedive. For example, provid-

ers could reduce the number

of points you earn per dollar

spent, increase the amount of

points you need to get rewards,

increase annual fees, cap the

number of points you earn at

aparticularrateandofferretail

discounts instead of the more

popular frequent flyer points.

This is probably a good oppor-

tunity to sit down and work out

whetheryourcardprovides

value for money. Rewards cards

often have extra costs attached,

suchasahighannualfeeora

highinterestrate,soit’sworth

seeing what other rewards pro-

grams are offering, or switching

to a low-rate card without the

hidden fees and charges.

Sally Tindall,money editor,

RateCity

THE BUZZ

ON MY MIND

Climb the property ladder

THIS MONTH

NEWS

&

VIEWS

W

hen I bought my first home

inthelate1980s,Ididn’t

care that it was ramshackle, I just

wantedtogetmyfootonthe

property ladder.

Nowyouhardlyeverheartheterm‘property

ladder’, and millennials want their dream family

homenow–notin20years.Butthat’showlong

it took me to progress through a series of houses

until I bought my current family home.

I’mcallingforaculturalshift:weneedtoreturn

toviewingpropertyownershipasalong-term,

gradual strategy.

So, if you’re a first-home buyer, just how

doyouclimbthepropertyladder?First,you

might need to rethink your expectations of a

firsthome.Buyinginthebestlocationyoucan

affordismoreimportantthangettingtheper-

fect home immediately.

And while many people think that the next

logicalstepistobuyabiggerhouse,youare

betteroffmovingtoprogressivelybetter

locations. That will build value faster than

graduating to bigger homes in the same

suburbandwilltakeyoutothenextrung on

your journey up the property ladder.

Angus Raine,executive chairman, Raine & Horne