The Personal Credit Card Market in Australia: Pricing over the Past Decade

There have been significant changes in the personal credit card market over the past decade, partly reflecting the Reserve Bank’s reforms from the early 2000s, which were aimed at improving efficiency and competition in the payments system. One of the effects of the reforms has been an improvement in price signals about the costs of different payment methods. For example, over the past decade the effective price to cardholders for using a credit card has increased, encouraging the use of lower-cost payment methods. At the same time, the cost to merchants of accepting credit cards has declined, with the benefit likely to have been passed on to all consumers, not just those who pay by credit card. Recently, though, there have been changes to the structure of rewards programs, which have the potential to increase pressure on merchant costs. New strategies adopted by issuers include: the introduction of ‘companion’ American Express cards; a substantial increase in the number of platinum card products offered to consumers; and the introduction of ‘super-premium’ cards.