Australia’s Interchange Cap Starts on 1 October. Qantas and Virgin Have Already Priced It In.

On 1 October 2026 the Reserve Bank of Australia caps the fee that pays for Australian frequent flyer points. In the last week of August, a day apart, the two airlines that run the country’s loyalty programmes told their investors what the coming year looks like. Neither is in trouble, and only one says why the money is tightening.

Qantas Loyalty had a good year. Underlying earnings before interest and tax reached A$625 million, up 12 per cent. Then the airline guided the coming year at 5 to 7 per cent. Virgin Australia’s Velocity Frequent Flyer had a good year too, with underlying EBIT up 12.3 per cent to A$143 million on revenue of A$487 million and margin up 110 basis points to 29.4 per cent. Then it guided the coming year to broadly flat.

What actually changes on 1 October

The Reserve Bank’s Review of Merchant Card Payment Costs and Surcharging concluded in March 2026 that current interchange levels were materially above efficient levels. From 1 October 2026:

• The cap on domestic-issued consumer credit card interchange falls from 0.8 per cent of transaction value to 0.3 per cent, and the separate 0.5 per cent weighted-average benchmark is abolished, leaving a cap-only regime.
• The commercial credit card cap is maintained at 0.8 per cent, with its benchmark also abolished.
• The debit and prepaid cap falls to 8 cents, or 0.16 per cent on an ad-valorem basis.
• Surcharging on the designated eftpos, Mastercard and Visa networks is removed.

A 1.0 per cent cap on foreign-issued card transactions follows on 1 April 2027, deferred to give the industry time to build for it.

Interchange is the fee a merchant’s bank pays a cardholder’s bank on every card transaction. It is invisible to the person holding the card and it is, for a rewards card, the principal thing paying for the rewards. The Reserve Bank does not leave this to inference. Its own conclusions paper describes networks competing for issuers’ business by offering higher interchange revenue, and says issuers "use this revenue to boost profits and fund generous rewards programs to incentivise card usage". The regulator is naming your points as one of the things the fee buys.

That chain is why a credit card gives you a point per dollar and a debit card does not, and it is the mechanism we set out at length in the hidden economics of airline miles. The ceiling on it has just been cut by more than half.

One piece of arithmetic is worth doing carefully, because it is easy to overstate. The cap falls from 0.8 to 0.3 per cent, a cut of five-eighths, but the cap is a ceiling rather than the rate most transactions actually pay. The Reserve Bank puts the average interchange rate on consumer credit card transactions at 0.47 per cent, with small merchants paying up to 0.8 per cent and the largest merchants receiving strategic rates as low as 0.18 per cent. Measured against that average, the compression is nearer a third than five-eighths, and it lands hardest on the card products that were sitting closest to the old cap. Premium rewards cards are exactly those products.

The Reserve Bank has published its own estimate of the size of the hole. Issuer interchange revenue is "expected to be reduced by an estimated $660 million per year", assuming no change in anyone’s behaviour, "with the bulk of this reduction affecting issuers of consumer credit cards". It has also published what it expects issuers to do about it: they "indicated that they could respond to a reduction in interchange revenue by reducing the benefits available on their consumer credit cards", naming lower rewards points, shorter interest-free periods and higher card interest rates. That is not a prediction this article is making. It is the regulator recording the industry’s own answer.

What Qantas said, and what it conspicuously did not

The Qantas FY26 results release of 27 August 2026 addresses the Reserve Bank in a single passage, which reads in full: "Following the Reserve Bank of Australia’s review of card payment costs and surcharging, Qantas has agreed revised commercial terms and extended agreements with its largest credit card partners across banking and financial services. Credit cards remain the most effective way for members to earn points."

Read that again for what is absent. It does not use the word interchange. It does not mention 1 October. It does not quantify an impact, give a sensitivity, or connect the Reserve Bank to the FY27 number at any point. The review is referred to in the past tense and the commercial consequence is presented as already settled.

That is a defensible way to write a results release. It is also a choice. In the same document, Qantas guided loyalty earnings growth down to 5 to 7 per cent, reaffirmed its 2030 target of A$800 million to A$1.0 billion in loyalty underlying EBIT, and left the two facts on separate pages.

The sentence that sits least comfortably is the last one. Qantas told members on 27 August that credit cards remain the most effective way for them to earn points. Two of its own co-brand partners, Bankwest and NAB, have published dated cuts to the rate at which their Qantas cards earn, taking effect on 1 October. The Qantas statement is defensible as a relative claim, because a card is still a faster way to earn than most alternatives, and it is not offered here as evidence of bad faith. But a member reading only that line would not learn that their card was about to earn less, and closing that gap is what the rest of this article is for.

The rest of the Qantas Loyalty numbers were strong: active members up 6 per cent, points earned up 9 per cent, points redeemed up 9 per cent, and a record five million flight Reward Seats. This is not a programme running out of road. It is a programme that has renegotiated its bank contracts and told the market to expect roughly half the growth.

What Virgin said

Virgin Australia’s FY26 results, published on 28 August 2026, are direct where the Qantas release is oblique. Velocity’s flat FY27 guidance is attributed to the Reserve Bank’s interchange changes from 1 October together with an accelerated three-year transformation programme, with low double-digit earnings growth targeted for FY28 and FY29 once that investment matures.

The segment underneath the guidance was healthy: more than 800,000 new members, active members up 9 per cent, external billings up 12.4 per cent and a record 38.6 billion points redeemed.

Two operators, one regulation, two levels of disclosure. Virgin named the cause. Qantas described the negotiation and left the reader to draw the line.

Where the compression actually lands, and it is not in the future

The reassuring version of this story is that a wholesale fee changes, the airlines absorb it, and cardholders notice nothing for a year or two. That is roughly how Europe went. It is not what is happening here.

Australian issuers have already published earn-rate cuts effective on 1 October 2026, the day the cap takes effect. Not warnings, not consultations: dated variation notices to existing cardholders. If you hold an Australian rewards card, the change reaches you on day one.

Virgin Money’s variation notice for the Velocity Flyer and High Flyer cards is the starkest, because it moves every lever at once. Bankwest’s credit card changes page is the more instructive, because on several of its cards the headline number does not move at all.

Read the Bankwest rows carefully, because they are the more sophisticated response and the one that will be copied. On the More cards the advertised earn rate is exactly what it was, and the annual points cap has been removed, which is a genuine improvement for a very high spender. What has been introduced is a monthly threshold above which the rate falls by 75 to 80 per cent. A member spending $1,000 a month on a More Classic sees no change at all. A member spending $4,000 a month keeps the full rate on the first quarter of that spend and earns a fifth of the old rate on the rest. Nothing in the marketing has to change.

The NAB rows carry the same lesson from the other direction. The Signature card’s headline rate falls from one point per dollar to 0.75, which is the visible cut, but the threshold at which it drops also falls from $5,000 to $3,000 and the monthly points cap falls from $20,000 of spend to $15,000. Three separate compressions, one date, one notice.

Nor is any of this confined to earning. NAB is changing the rate at which its own points convert into Velocity Points on the same date, from two NAB Rewards Points per Velocity Point to three. That takes a third off the value of a transferable balance and appears in no earn-rate comparison table anywhere.

And the table above is a sample rather than a survey. Westpac has published its own changes for 30 September 2026, the day before the cap, across Altitude Rewards, Altitude Qantas and Altitude Velocity Platinum and Black cards: purchase rates to 23.99 per cent, a minimum payment rising from 2 per cent or $10 to 2.5 per cent or $25, a new $75 rewards programme fee on Altitude Rewards Platinum, and earn-rate changes alongside. St.George and Bank of Queensland have published changes in the same window. The practical implication is the one that matters: assume your card is affected and go and check, rather than assuming it is not.

None of this is a surprise in mechanism. It is exactly the sequence a funding squeeze runs through, and the only unusual thing about Australia is that all four stages have been compressed into a single date.

So the earlier advice to watch the offers rather than the earn rate still holds for the cards that have not moved yet, but it is no longer the whole picture. The instruction for the next month is simpler: read your own card’s variation notice. This is the same quiet-substitution pattern we traced in unbundling as the new devaluation, running at speed: on the Bankwest cards the price on the label holds exactly while what the label buys gets smaller.

The airlines are moving the earn engine somewhere the regulator is not

On 18 August 2026, Velocity and Commonwealth Bank announced that from 1 October 2026, more than nine million CommBank Yello customers will be able to convert points earned across savings accounts, home loans, insurance and credit cards into Velocity Points. The go-live date is the day the cap takes effect, and Virgin Australia’s own announcement says the plainest thing anybody has said about this whole episode. The offering is, in the airline’s words, "the first in a series of enhancements to Velocity’s financial services offering, ahead of changes to credit card interchange and surcharge rates announced by the Reserve Bank of Australia".

Velocity chief executive Andrew Cleary put the strategy on the record in the same release: credit cards "will continue to play an important role in Velocity", but the programme is "broadening our financial services offering to create more ways to earn Velocity Points through products like home loans and transaction accounts". That is an airline and a bank together moving the earn engine off the one revenue line a regulator has now capped, and saying so.

Qantas has pulled a different lever. Its programme changes launching on 8 December 2026 let members earn up to 140 Status Credits a year on the ground, by collecting points on everyday spend across cards and banking, utilities, hotels, fuel and shopping, and those credits count towards lifetime balances. Status Credits are not points. They cost the airline nothing in interchange, because no bank is buying them.

When the regulated currency gets more expensive to issue, the unregulated one becomes more attractive to give away. Both airlines have reached for the same idea from opposite ends: Virgin by widening what a bank relationship can earn, Qantas by handing out the status currency rather than the reward currency. That is not a coincidence of timing, and it is the most interesting strategic response in the episode.

Has this happened before

Interchange caps are not new, and Australia has not chosen a novel number. The Reserve Bank’s own reasoning names the comparison: it considered the case for change partly because Australian consumer credit interchange remained "higher than in some jurisdictions, notably the EEA and the United Kingdom, where consumer credit card interchange is capped at 0.3 per cent of transaction value". Europe and Britain have run at that ceiling since 2015 under the EU Interchange Fee Regulation, and co-brand programmes in both markets are still here.

What changed in those markets, on most accounts, was generosity rather than existence: fewer points per pound, higher annual fees, thinner sign-up bonuses, and the best earning concentrated in premium cards with fees that only high spenders justify. That is a directional read rather than a measured one, and it is worth holding loosely. What it is not is apocalyptic, and anyone telling you Australian points are about to stop existing is arguing against eleven years of European evidence.

The honest summary is that a cap of this kind does not end a loyalty programme. It makes it less generous over a period measured in years rather than weeks, and it pushes the generosity that remains towards the customers a bank most wants to keep.

What about Singapore, and everywhere else

Singapore has no equivalent cap, and nothing changes for a Singapore-issued miles card on 1 October. What does apply is the currency. A traveller crediting to Qantas Frequent Flyer or Velocity holds a currency whose economics are being regulated in another country, and if your DBS, UOB or Citi points route to Qantas, the change reaches you through the transfer partner rather than through your card. If that gives you pause about where a Singapore-based earner should be pointing bank points at all, our comparison of the best frequent flyer programme for a Singapore traveller takes the question from the other end.

The wider read-through matters more. Europe went through this in 2015, but it did so before airline loyalty divisions were routinely reported as separate segments with their own forward guidance. Australia is the first market to compress a listed frequent flyer programme by regulation and have the operators quantify the effect in forward guidance. The 5 to 7 per cent and the flat guidance are, in effect, the first published price of interchange regulation on airline loyalty. Anyone arguing about card competition rules in Washington, Brussels or Singapore now has a number to argue with.

What to do in the next thirty days

Four things, in order of how much difference they make.

Read your own card’s variation notice, and read it now rather than in October. This is the only item on this list that is genuinely time-limited, and it contains a trap worth knowing about. Virgin Money’s notice applies the new earn rate to eligible transactions "processed to your Account on or after 1 October 2026", and says so explicitly of transactions "made prior to this date but processed on or after 1 October 2026". The cut-off is the processing date, not the date you tap the card. A purchase made in the last days of September that settles in October earns at the new rate. If you are bringing forward a large planned purchase to beat a published cut, leave real clearing time rather than buying on 30 September, and check whether your own issuer words it the same way, because not all of them will.

Do lock in a bonus if you were going to anyway. Sign-up and transfer bonuses are the first thing to get quieter, and the current Australian offers were negotiated under the old economics. If a card was already on your list, the case for acting this quarter rather than next is better than it was.

Check the conversion ratio as well as the earn rate. NAB is changing the rate at which its own points become Velocity Points on 1 October, and a transfer ratio moving from two to one to three to one takes a third off a balance without touching a single earn rate. Bank-currency holders are exposed to this in a way pure co-brand cardholders are not, and it shows up in no comparison table. Our guide to credit card points devaluation covers what that language usually looks like.

Do check where your Australian points actually sit. The awkward part of a change like this is that it does not show up in any one programme’s statement. It shows up as a slow divergence between programmes, one currency getting quietly harder to accumulate while another does not, and it shows up in your qualification year before it shows up in your balance. If you hold Qantas Points, Velocity Points and a couple of transferable currencies, that divergence is close to impossible to see one login at a time. Seeing several programmes on one screen is the only way the pattern becomes visible, which is the problem Miles Mosaic was built for. It tracks miles, points and elite status across 31 programmes, 24 airline and seven hotel, plus eight transferable card currencies, without asking for an account password. The free Explorer tier is ad-supported; Pro is $14.99 a month and ad-free.

Then watch two things. The first is how far the wave spreads: the issuers that have already published cuts are not the whole market, and the ones that stay quiet as October approaches are the interesting cases. The second is the FY27 half-year results in February, which will cover three months under the new rates. That is enough to see a direction and not enough to settle the question, but it will show whether the cuts already announced were the whole adjustment or the first instalment of it. Either way, the moves that protect a balance are the same ones that protect it against any programme moving against you: spend a currency that is getting worse, and keep the balance in the one that is not.