The quiet reform that could end Australia’s Frequent Flyer boom
- FlightIQ
- Jul 19
- 6 min read
Everyone is talking about the end of card surcharges. But buried within the same Reserve Bank reforms is another change that could make the dream of flying Business Class on points much harder to achieve.
Developing story: This is an evolving situation, and this article will be updated as new information emerges.
Australia’s payment reforms are still unfolding, and banks have already begun changing parts of their rewards portfolios.
Over the coming months, I’ll continue reporting on the announcements, explaining what they mean for frequent flyer members and identifying the strategies and opportunities that remain. Last updated: 19 July 2026.
For more than two decades, Australians have enjoyed one of the most generous frequent flyer ecosystems in the world. That era may now be coming to an end.
Generous credit card sign-up bonuses have helped fund countless Business Class holidays. Not so long ago, a single credit card approval could earn enough Qantas Points to fly one-way to Europe in Business Class. For everyday Australians who could never justify paying thousands of dollars for a premium cabin, points opened the door to experiences that would otherwise have remained out of reach.
There are actually two reforms happening
Most of the public discussion has focused on the first reform: the end of card surcharges. It's generally been reported as the Reserve Bank banning surcharges, but the reality is a little more nuanced.
Rather than banning surcharges directly, the Reserve Bank has removed its prohibition on "no-surcharge" rules, that have been in place for the past two decades. This allows the designated four-party card schemes: Visa, Mastercard and eftpos, to once again prohibit merchants from adding surcharges to personal card transactions if they choose. All three have indicated they intend to do exactly that from 1 October 2026. American Express operates differently. As a three-party scheme, it isn't regulated by the Reserve Bank in the same way, but it has also announced that it will voluntarily prohibit surcharging on its consumer cards.
For consumers, this is largely good news. Card surcharges have become confusing, inconsistently applied and, in some cases, excessive. The Reserve Bank has acknowledged that the existing rules have become difficult to enforce and no longer reflect how Australians pay today. When surcharging was first introduced, cash was generally the cheapest payment method for businesses. Today, that isn't necessarily the case. Handling cash comes with its own costs, including security, reconciliation, banking and administration, meaning electronic payments are no longer the clear outlier they once were.
There is therefore a legitimate case for modernising the system. The Reserve Bank estimates the broader package of reforms will save Australian consumers around $1.2 billion each year, or roughly $80 per person. Few people would argue that reducing confusing or excessive surcharges is a bad outcome.
The bigger story however lies in how the Reserve Bank has chosen to deliver those savings.
Buried within the same package of reforms is a second change that has received far less attention but could have a much greater impact on Australians who collect frequent flyer points. That change concerns interchange fees.
The hidden engine behind your credit card points
Every time you tap your credit card, a surprising amount happens behind the scenes.
The merchant doesn't receive the full amount you pay. Instead, they pay a merchant service fee to process the transaction. That fee is then split between several parties: the payment network (such as Visa or Mastercard), the bank that processes the merchant's payments, and the bank that issued your credit card. It's that last payment, the interchange fee, that matters for frequent flyer points.
For years, interchange has been one of the main ways banks funded the rewards attached to premium credit cards. Every Qantas Point, Velocity Point, lounge pass or complimentary travel insurance policy has to be paid for somehow, and interchange has been an important part of that equation.
In the middle of a cost-of-living crisis, the Reserve Bank has focused on reducing the cost of card payments to consumers. One of the key ways it has sought to achieve that is by imposing a significantly lower cap on interchange fees.
The change is substantial. Before 2017, interchange fees could be as high as 1.8%. They were then capped at 0.8%, and under the latest reforms will be reduced again to 0.3%.
The trade-off nobody has measured
The impact on credit card rewards is acknowledged throughout the Reserve Bank's papers, yet I couldn't find any meaningful attempt to estimate its scale. The reforms are expected to save the average Australian around $80 a year, but there is no comparable estimate of what consumers might lose if banks reduce rewards in response.
Qantas Frequent Flyer now has more than 18 million members, while Velocity has almost 13 million. Many Australians belong to both programs, but the sheer scale of those memberships illustrates that frequent flyer rewards are no longer a niche benefit for affluent travellers. They're woven into the financial lives of everyday Australians, helping families afford holidays, upgrades and travel experiences that might otherwise remain out of reach.
Before celebrating an $80 annual saving, it's worth asking what consumers might be giving up in return.
The UK's cautionary tale
The United Kingdom offers a useful glimpse of what a lower-interchange market can look like. Rewards cards still exist, but sign-up bonuses are smaller, earn rates are weaker and premium benefits are generally less generous than Australians have become accustomed to.
For example, today many of the UK's strongest credit card sign-up bonuses sit at around 20,000 to 50,000 points. By comparison, Australians can still access offers worth up to 150,000 points. The contrast offers a glimpse of just how dramatically Australia's rewards market could change if the economics continue to tighten.
The first signs may already be emerging. NAB has announced significant changes across parts of its rewards portfolio, including lower earn rates on some products and changes to eligible spending. While NAB hasn't attributed every change directly to the Reserve Bank reforms, it provides an early indication of the pressure banks are already facing.
Australia won't necessarily follow the UK's path exactly. Our banking market, airline loyalty programs and regulatory settings are different. But the direction of travel is becoming harder to ignore. If the economics behind rewards continue to weaken, Australians shouldn't assume today's generous sign-up bonuses and earn rates will still be available in the years ahead.
Three reasons to be optimistic
1. Frequent flyer points aren't going away
Frequent flyer programs are big business. Qantas Loyalty now contributes around one-fifth of the Qantas Group's earnings, so airlines remain highly incentivised to keep their loyalty programs attractive to consumers. Airlines still need to sell points to banks and commercial partners, build customer loyalty, and fill seats that would otherwise depart empty. The way Australians earn points may evolve, but the fundamental value of loyalty programs to airlines has not changed.
2. Business owners could be the biggest winners
The Reserve Bank's new interchange caps don't apply to commercial cards. That could leave ABN holders, sole traders and businesses as some of the biggest beneficiaries of consumers' lost earning power.
3. Strategy will matter more than ever
If points become harder to earn, getting the best possible value from them becomes even more important. Australians who continue travelling well won't necessarily be those earning the most points: they'll be the ones using them most strategically.
Understanding where the best opportunities have moved, choosing the right loyalty program, redeeming points wisely and taking advantage of high-value promotions will matter far more than chasing small differences in everyday earn rates. The next era of frequent flyer points won't simply reward those who collect the most points. It will reward those who use them smartest.
How to stay ahead
1. Review your current cards (before 1 October)
If you've been considering applying for a rewards card, it may be worth acting before the new rules take effect. Banks moved quickly after the 2017 reforms, and they could do so again.
2. Watch for announcements
Expect a wave of emails from banks over the coming months. Read them carefully, understand what's changing, and avoid making snap decisions until the new landscape becomes clearer.
3. Work out what your points are actually worth
Don't focus on how many points you're earning. Focus on what they're saving you. If points become harder to earn, value per point becomes more important than ever.
4. Review your earning strategy
Once the dust settles, reassess where you're earning points. Some cards and opportunities will become less attractive, while others may emerge.
5. Remember that points aren't the only answer
Sometimes the best deal isn't a points redemption. Discounted Business Class fares, cash upgrades and creative routing can all deliver outstanding value. The goal isn't to earn the most points: it's to travel better.
The reforms won't play out overnight. Banks are likely to respond over the coming months and years, creating both challenges and new opportunities for Australians who collect frequent flyer points.
I'll continue following every major development, analysing what it means and identifying the best opportunities as they emerge. Flight IQ subscribers will receive those updates first, along with practical strategies to help them stay ahead.
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