Banks slash reward programs after they were told to lower charges - with thousands of Aussies promising to switch to cash so they get no fees

By ASHLEY NICKEL, NEWS REPORTER, AUSTRALIA Published: 12:54, 24 August 2026 | Updated: 12:56, 24 August 2026 Banks around the country are cutting their rewards programs to save money amid an upcoming fee cap, leaving thousands of fed-up Australians declaring they would switch to cash. From October 1, the cap on interchange fees will be lowered by the Reserve Bank from 0.8 per cent to 0.3 per cent of the transaction value. Interchange fees are costs banks charge businesses to process card transactions and the RBA estimates they will lose about $660million annually from the change when it is introduced. Also from October 1, businesses will be banned from charging customers an additional surcharge for debit and credit card payments to cover interchange fees.  Instead, those costs have to be baked into an item's shelf price.  Banks around Australia seem unwilling to absorb the multi-million-dollar fee loss and have instead made major cuts to their rewards programs. Those cuts have infuriated thousands of customers with many vowing to switch entirely to cash so the banks get no interchange fees at all on their spending. 'Cash doesn't have surcharges. Cash won't be monitored where you spend it. Cash is king,' one wrote. Thousands of Australians have sworn to switch to cash following a series of reward program cuts by major banks in response to a cap on fees Banks are set to lose an estimated $660million annually after the RBA lowered interchange fees (pictured is RBA governor Michele Bullock) 'With all the profits and bonuses that are awarded', another disgruntled customer said, 'I think banks can absorb (the loss).' 'We all need to use cash more. It is not possible in all cases but increase the amount of expenses that we do pay by cash. For example, petrol, groceries etc. I'm deliberately doing both,' a third wrote. Canstar director of data insights Sally Tindall noted several major banks have already begun slashing customer rewards. Commonwealth Bank is in the process of moving its rewards credit cards to fall under its Yello loyalty program. The rewards earned by customers will depend on their Yello tier from September 29 and some rewards will need more points to be redeemed. For example, reward card users can currently redeem a $50 Myer gift card for 10,950 points, but that same gift card will cost 12,500 points under the Yello program. Westpac, and its subsidiaries, will increase the interest rate of cards by up to 3 per cent and increase their annual fees. The bank's Qantas Platinum card alone will see its annual fee jump from $75 to $125.  From October 1, businesses will be banned from charging an additional surcharge on card transactions with those costs having to be baked into the shelf price St.George, Bank of Melbourne and Bank SA are cutting their interest-free periods from up to 55 days to up to 45 days.  'What we've seen is a really broad range of different ways to cut value from those rewards cards, which includes hikes to card fees and hikes to interest rates,' Ms Tindall told News.com.au. Ms Tindall explained the banks are using the fee ban as a 'circuit breaker' to reevaluate the profitability of their loyalty schemes. She urged customers to also consider a reset of their finances by evaluating the actual worth of their cards. 'Use this as an opportunity to do a stock take of exactly whether you're ahead or in the red from your card,' Ms Tindall said. 'And it could be potentially the circuit breaker that you need to get rid of the credit card altogether and move to paying with debit.' She recommended cardholders write down how much they spent in fees over the last year versus how many points they redeemed and for what value. Those with points accumulated through rewards cards were also urged to consider redeeming them ahead of any scheme changes.