Taking a companion card

Anyone with a passion for points will love the concept of companion cards. This is where American Express, long recognised for its superior points program, is added to a Visa or Mastercard. It effectively gives you two different credit cards with only one account, one annual fee and one due date.

Why bring a companion card?

The advantage of having companion cards in your wallet is that shoppers can swipe their AMEX to maximise their points earned, or use their Visa or Mastercard in places which don’t accept American Express, or only do so with a surcharge.

Not surprisingly, companion cards are popular, with many now on the market from a variety of banks, including the Big 4.

But wait…

It all used to be so straightforward but now building points fast with companion cards comes with a trap that may affect you if you’re not aware of it.

To put it simply, points capping on points earned through American Express and Visa/Mastercard were once always added together. Now, in some cases, points are separated and capped at a certain spend level.

The ANZ Classic Frequent Flyer card, for instance, currently caps AMEX and Visa points at a monthly spend level of $3,000 each. This limits how much you can spend on each card to be earning rewards. Once the points allocation has been exhausted on one card, to continue to earn rewards the cardholder will need to use the other card.

And then there’s the recent RBA decision…

Things may be changing for those who use a companion card (an American Express card issued with a Visa or MasterCard). For years, these cards have been a great way to get the most out of a rewards program while still having the option of paying by Visa or MasterCard when an Amex surcharge would apply or maybe not accepted (as we’ve outlined above). But as a result of the Financial Systems Inquiry, AMEX companion cards will soon be treated like normal cards – which could mean a change in what’s on offer.

The Reserve Bank (RBA) has said that it will now regulate the Visa and MasterCard credit cards that are attached to AMEX programs. This may change both fees and rewards – fees may get higher, and rewards may be likely to get lower. Currently, bank-issued American Express cards earn about twice the number of rewards points of their partnered Visa or MasterCard. Until now, being exempt from regulation, they have been able to set higher interchange fees for merchants, at around 1.7% on Amex transactions compared to 0.8% on Visa and MasterCard. This higher interchange fee meant they could therefore afford to give consumers higher rewards. If the RBA decides to cap interchange fees on bank-issued American Express cards in the same way that they do with the other card schemes, a reduction in rewards points could mean that they become a far less appealing option for consumer. It is also possible that the banks would no longer be interested in issuing American Express cards. Amex has fought back against the move, with a spokeswoman saying, “Where is the public interest in regulating Amex bank-issued cards? We maintain that robust competition is the only way of guaranteeing efficient markets.”

Watch this space…

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