Are rewards credit cards still worth it after banks cut points?

Australians who rely on credit cards to rack up frequent flyer points are being warned to brace for sweeping changes, with major banks hiking annual fees, cutting earn rates and stripping away popular perks ahead of the October 1 surcharge ban.

For years, Australians have been able to build up sizeable frequent flyer points stashes by putting their everyday spending on a rewards credit card.

But that could be about to change.

With a card surcharging ban coming into effect in less than a month, Australia's largest banks have been busy upping card fees, reducing earn rates and adjusting their rewards programs.

The good news? Frequent flyer points aren't dead. But rewards cardholders may have to think about switching up their strategies to adapt to the shifting landscape.

Why are banks cutting rewards points ahead of the October 1 surcharge ban?

From October 1, surcharges on credit, debit and prepaid cards across the eftpos, Mastercard and Visa networks will be banned. American Express will also remove surcharging from its network.

At the same time, the interchange fee cap on consumer credit cards will be lowered to a maximum of 0.30% of the transaction value.

The reforms come out a review by the Reserve Bank which found that a ban would help simplify transactions for consumers and increase competition among payment providers.

In total, the RBA estimates that the ban will save card users $1.6 billion in fees each year. However, critics argue that surcharge costs will simply be passed on via higher prices.

But what do these changes have to do with rewards credit cards and frequent flyer points?

"At a base level, this is about the pool of money that the banks have to fund rewards in the form of frequent flyer points and benefits attached to their cards," explains Adele Eliseo, frequent flyer expert and founder of The Champagne Mile.

"That's going to dramatically reduce from the first of October because they [the card providers] can't apply surcharges and they can't go above the 0.30% interchange cap."

Which banks are cutting credit card rewards and frequent flyer points?

While the surcharge ban is still weeks away from coming in, credit card providers have already been taking action - most notably, Australia's four major banks.

"We expected a uniform approach in terms of bonus points and earn rates being reduced, and benefits being slashed, but what we've seen has been quite varied from the big four," Eliseo says.

"ANZ have removed benefits such as travel insurance from their products, while raising some annual fees. We've also seen NAB and Westpac come out with some caps on earn rates."

Take Westpac's Altitude Qantas Platinum card, as an example. From September 30, the purchase rate and cash advance rate will be increased, and the annual card fee will rise from $75 to $125.

While the Qantas Points earn rates on international and everyday spending will remain unchanged, the earn rate on all other spending will be cut from 0.35 to 0.33 points per $1.

Arguably the biggest move has come from CommBank though. In addition to fee and benefit changes across its credit card suite, the bank announced that it's moving away from its traditional Awards points system and folding credit card rewards into the Yello ecosystem.

"CBA have done something quite extraordinary in entirely overhauling their approach to rewards and centring it around a whole of bank relationship that is going to reward their customers," Eliseo says.

Now that the big four banks have set the agenda, Eliseo expects other credit card providers to follow suit - including major players like American Express.

"We'll see others respond as we get closer to that October 1 date. I think that one thing that's really going to be an interesting to keep an eye on is to see how far down bonus point offers go."

Are rewards credit cards still worth it in 2026?

With changes being made left, right and centre, the outstanding question for many cardholders will be whether their credit card is going to continue to be a valuable points-earning tool.

Ultimately, it will come down to the individual. That's why Eliseo suggests that cardholders crunch their own numbers once they get a clearer picture of any changes being made.

"Many banks will be implementing higher annual fees than what you've previously paid, while also removing some of the benefits associated with those cards.

"So really, it's worth doing the maths to make sure that the benefits you're getting still make sense for the amount you're paying for the product."

Going forward, Eliseo believes that there will be opportunities to earn a competitive number of frequent flyer points through credit card spending though. It just might not be quite as generous.

"While we've seen some of the banks reduce their points per dollar earn rates on spend, there are still solid earn rates available.

"Some of them are capped, so if you're a really high spender, you might find it hard to put a huge amount of spend through those cards.

"But for someone spending $5000 a month, there are still good opportunities that make using a credit card as a vehicle to collect points worthwhile. As long as it suits your individual circumstances."

How can you earn frequent flyer points without a credit card?

While a relatively lucrative option, historically, rewards credit cards are just one of the many ways in which Australians can earn the likes of Qantas Points and Velocity Points.

"The airlines have become really good at engaging with businesses beyond banks, so the ways in which people can earn points on the ground have exploded in the past five years," Eliseo says.

"Really, it's possible to earn points across most everyday spending categories now, like groceries and petrol.

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