I was updating the credit card database page on Head for Points yesterday and noticed some shocking changes to the interest rates charged on many popular travel credit cards.
Since the EU capped credit card interchange fees at 0.3% in December, it has become hugely difficult to make money out of average spenders. Whilst travel credit card holders are wealthier than average, this means that very few of them pay interest.
The upside, as I was told at the credit card conference I attended earlier in the year, is that when they do pay interest, they are paying it on a larger than average balance.
Here are the changes I noticed yesterday on a range of free cards. The rates quoted are for new applicants and may not necessarily have been imposed on existing cardholders:
American Airlines American Express and Visa (MBNA) – up 5% to 22.9%
Emirates Skywards American Express and Visa (MBNA) – up 5% to 22.9%
Etihad Guest American Express and Visa (MBNA) – up 4% to 22.9%
HSBC Premier MasterCard (HSBC) – up 7% to 18.9%
Lufthansa Miles & More American Express and Visa – up 6% to 22.9%
United MileagePlus American Express and Visa – up 4% to 22.9%
Virgin Atlantic White American Express and Visa (MBNA) – up 5% to 22.9%
Where these cards have a paid version (Emirates, Virgin) those have also gone up by just over 5%.
Marriott Rewards has also increased the rate on its MasterCard but that card is not currently available to new applicants.
In the short term, as card issuers are tied into contracts with the airlines, ramping up interest rates is the only weapon they have. Changes in annual fees or earning rates would require contract renegotiation – but those will be coming too over the next couple of years as deals are renewed.
(Want to earn more miles and points from credit cards? Click here to visit our dedicated airline and hotel travel credit cards page or use the ‘Credit Cards Update’ link in the menu bar at the top of the page.)