Banks are making huge profits. So why are they cutting credit card perks?
Thursday, 27 November 2025
The golden age of credit card rewards may be coming to an end.
Two major banks have already rolled back the benefits in their rewards schemes, and others will likely follow suit.
KiwiBank ended its Airpoints credit card partnership with Air New Zealand earlier this year, officially closing the programme on October 31.
Customers have automatically been migrated to low-fee cards, with pared-back rewards.
BNZ has also updated its scheme, significantly cutting rewards, reducing interest-free days, and dialling back on travel insurance benefits.
The changes being rolled out under BNZ mean that cardholders will earn only 94 cents for every 200 BNZ Points, down from the previous reward of $1.28.
Put another way, 100,000 BNZ Points would still earn you a cashback of $640 today. But after 3 February, that reward will drop to only $470.
Travel insurance changes will see the excess rise from $200 to $300 per claim, the removal of domestic rental coverage and the exclusion of both snowsports and cruises.
BNZ is also reducing its interest-free days from 55 to 44, meaning you’ll have to pay down any credit card debt 11 days earlier than you would have had to in the past.
These changes are material for Kiwis who use their credit cards for discretionary spending, and also for those who rely on travel insurance via their card. The combination of secure transactions combined with benefits like travel insurance can be useful tools in building and protecting your wealth, but anyone with a credit card should always be keeping an eye on what is and isn’t included and whether they’re still getting a good deal.
While Kiwibank and BNZ are the first two major banks to render these changes, they likely won’t be the last.
Thus far, ANZ, Westpac and ASB haven’t tweaked their reward programmes, but it will pay to keep an eye on any moves or reviews in the coming months.
Why are the rewards being cut now?
No matter where you look across our big banks you see massive profits. Recent results showed ANZ post net profit of $2.5 billion, Westpac $1.2 billion, BNZ $1.5 billion, ASB $1.35 billion and Kiwibank $191 million.
So why are some banks cutting the rewards at a time when business seems to be doing just fine?
Both Kiwibank and BNZ have attributed their credit card changes to a small regulatory update that many of us would not even be paying attention to.
From 1 December this year, we will see the introduction of a new cap on something called interchange fees.
A source in the banking industry explained to me that this is simply a small fee that a retailer’s bank will pay your bank every time you swipe or tap your credit card.
For instance, every time you swipe to buy a cup of coffee, 2 cents of the retail price will go toward covering the interchange fee. It’s not much, but this little slice of money is what banks use to fund all those shiny perks.
Under the changes coming into effect, the cap on an interchange fee will drop from 0.8% to 0.3% for in-person transactions and from 0.8% to 0.7% for online transactions.
This small adjustment is expected to save retailers in the vicinity $100 million, which is great for Kiwi businesses but not so much for those who love a credit card reward.
In a statement provided to Stuff, a BNZ spokesperson described these changes as “significantly” reducing the interchange fees banks receive on credit card transactions.
“In this new environment, we reviewed and have adjusted our programme to ensure it remains sustainable and that we can continue offering value to our customers,” the spokesperson said.
“While other banks’ responses have included cancellation of rewards programmes outright, we’re keeping ours because our customers have told us how much value they gain from their BNZ credit card rewards.”
Could other banks follow?
Spokespeople from both ASB and ANZ told Stuff that they haven’t made any changes yet, but did leave the door open for a review of what they offer.
ASB’s spokesperson said: “… the caps will have a material impact, and we may relook at our programme in the future as a result.”
Moneyhub founder Christopher Walsh tells me banks are quite limited in terms of what they can derive revenue from in this space. It largely comes from annual fees, interest on late payments and interchange fees. Reducing the interchange fees takes a big slice out of the revenue-earning potential in this part of the business.
Walsh says we’re still early in the rollout, and we should expect other banks to review their propositions in the coming months.
“What I predict is that, yes, the other banks will drop or decrease some benefits,' says Walsh.
'If your revenue is from the merchant fees drops, which it would do under the interchange fee regulation, then you can imagine that the benefits they're going to pay out, they're going to drop as well.'
Any time you have a period of change, it does, however, present an opportunity for some players in the market to innovate or use their rewards in marketing.
It wouldn’t be far-fetched to see some banks using credit card rewards as loss leader in an attempt to attract customers from other banks, particularly given there is so little separating the big players from each other.
It will also pay to keep an eye on newcomers like Sharesies, which earlier this year released a debit card offering a $1 reward for every $100 spent.
As these new rules come into play and major banks consider whether their settings are still correct, it will be incumbent on customers to see if what they’re getting still makes sense in light of annual fees and interest charges for missed payments.
Credit cards can be fantastic financial tools when used appropriately, but they can also be dangerous if you lose track of what’s being offered and when you’ll be charged for missed payments.
And if you’re about to go on a cruise or head out skiing, don’t automatically assume that your credit card will cover the bill if you end up with norovirus or a huge bump on your head. It always pays to read the small print.