Commonwealth Bank axes American Express credit cards

EXCLUSIVE | The Commonwealth Bank will stop issuing new American Express credit cards later this year and will cancel all existing CBA American Express cards in Australia before year's end.

All current customers will find their CommBank Awards American Express cards disabled from November 1 2018, meaning all CBA AMEX transactions will be declined from that date.

This applies to both personal and business credit card holders, so whether your card is Standard, Gold, Platinum or Diamond, issued directly to you or via your business, if it's a Commonwealth Bank American Express card, you won't be able to use it come November.

Internal Commonwealth Bank documents sighted by Australian Business Traveller outline the bank's plans, which CBA has since confirmed.

To continue earning points in the Commonwealth Awards program, you'd need to revert to the 'backup' Mastercard also provided as part of your CBA credit card account – or the backup Visa, if you're a long-time customer and haven't changed your card type in many years, which will become your only CBA credit card.

New customers applying for the bank's various Awards credit cards will still receive a new AMEX card, plus a companion Mastercard, if their application is received and gets final approval by August 31 2018 – but from November 1, those AMEX cards will be still disabled, as with all CBA AMEX products.

Customers applying for new CBA Awards credit cards on and from September 1 2018 will receive a Mastercard only, and will not be able to request an American Express card.

The same is true for existing cardholders migrating from one CBA credit card to another from September, as their new card will be Mastercard-only.

In related news, the bank has also axed its personal Gold Awards AMEX + Mastercard credit card combo for new customers, who can only now apply for Standard, Platinum and Diamond Awards accounts.

Why is CBA ditching its American Express cards?

According to internal Commonwealth Bank documents sighted by Australian Business Traveller, the shutdown stems from the Reserve Bank of Australia's decision to cap interchange fees for bank-issued American Express cards to the same rate as Visa and Mastercard.

Read: How the interchange cap will affect credit card frequent flyer points

Banks traditionally issued American Express cards to customers because businesses paid higher fees to process these payments: and a portion of those fees were passed along to the banks to help fund higher frequent flyer points earning rates on AMEX transactions, compared to traditional Visa and Mastercard purchases.

Now, with bank-issued AMEX cards providing no extra revenue per transaction than a Visa or Mastercard, there's no incentive for banks to continue issuing these cards alongside Visas and Mastercards, with ANZ, NAB and Westpac all having ditched their direct-issued AMEX cards, although Westpac has recently introduced Westpac-branded AMEX cards issued directly by AMEX, which aren't subjected to interchange fee caps.

"This (RBA) change affects the ability of banks to reward AMEX credit card customers with higher Awards points earn," CBA's document explains.

"We regularly review our product offerings and have made the decision to close our AMEX companion credit cards from Thursday 1 November 2018," a spokesperson for the bank told Australian Business Traveller, which mirrors the information distributed to CBA employees today.

CBA is advising its customers of the withdrawal of AMEX cards next week and will provide them with similar information to help them manage the change, the spokesperson shared.

“The RBA’s regulatory changes introduced in July last year created widespread disruption of the digital payments landscape with banks choosing to either devalue their rewards programs or remove the American Express companion cards," an American Express spokesperson told Australian Business Traveller.

While "Commonwealth Bank American Express companion cards will close on 1 November 2018... American Express’ other commercial arrangements with Commonwealth Bank will continue", the spokesperson added, such as the Simple Merchant Plan for small businesses which makes it easier and more affordable to accept AMEX.

What now for CBA American Express cardholders?

Firstly, as all existing CBA AMEX cards will be cancelled come November 1, if you currently have any direct debits or other automatic payments being charged to your CBA American Express card, you'll need to move these payments onto a different card before that date, as all CBA AMEX transactions will be declined from November 1.

Don't forget about services which store your credit card number for use, either – card details on platforms such as PayPal and Uber will also need to be updated.

The Commonwealth Bank has confirmed to Australian Business Traveller that it will not be reducing annual fees charged on any of its Awards products in light of this change, nor will it be increasing the number of points awarded on Mastercard spend.

Commonwealth Awards points which have already been earned can continue to be spent even after American Express cards have been closed, which for most savvy card users means converting them into Velocity Frequent Flyer points with Virgin Australia (Qantas Points are an option too, but are credited to your account monthly, not manually transferred).

But as we've previously highlighted, CBA cardholders already earn more frequent flyer points per dollar spent under the current two-card program by using their Mastercard for most purchases, not their American Express card, which actually has a lower earn rate except in a few bonus categories like department stores and overseas spend.

Read: CBA's credit cards among the country's worst for earning frequent flyer points

With bank-issued American Express cards coming to a close, the only American Express cards remaining in the market will be those issued directly by American Express, which offer some compelling frequent flyer earning rates.

For Qantas frequent flyer points, the Qantas American Express Ultimate card offers 1.5 Qantas Points per $1 spent, plus 55,000 bonus Qantas Points. There's a $450 annual fee, but that's offset by the inclusion of a $450 Qantas Travel Credit every year to spend on Qantas flights – so if you'd have spent that much on flight bookings anyway, the card is practically free.

Spenders preferring Virgin Australia Velocity frequent flyer points could instead look to the AMEX Velocity Platinum credit card, providing a similar earn of 1.5 Velocity points per $1 spent, 50,000 bonus Velocity points for new customers, a free return domestic flight with Virgin every year and airport lounge visits, aside a $375 annual fee.

Another option for Velocity points or for miles in popular overseas programs like Singapore Airlines KrisFlyer, Cathay Pacific Asia Miles and Emirates Skywards is the AMEX Explorer credit card, giving the equivalent of 1.5 frequent flyer points per $1 spent through AMEX's Membership Rewards program, with the $395 annual fee offset by a $400 travel credit (travel voucher) every year.

Chris C.

Chris is a a former contributor to Executive Traveller.