Confused about AMEX's credit card changes? Here's how they affect you

With American Express planning significant changes to the earning and redeeming of credit card frequent flyer points from next year, almost every AMEX cardholder in Australia will be affected: but many people are confused about what this means for them.

Read: American Express overhauls credit card frequent flyer points

Australian Business Traveller puts AMEX’s changes under the microscope to see how they’ll directly affect cardholders across a range of spending volumes and card types, including one very popular multi-card strategy, to explore the full impact.

(If you haven’t yet read our initial coverage, we'd suggest doing so first to gain a broad overview of what’s happening, before returning here to dive into the detail.)

1. The impacts for AMEX Platinum Charge Card customers

As reported earlier, the Platinum Charge Card will do away with the current structure that provides more points on dining and travel and fewer points on insurance and utilities, in favour of an increased ‘everyday’ earn rate across the board, equal to 1.125 frequent flyer points per $1 spent.

To see how that compares to today’s system, here’s firstly what a customer spending $150,000/year on the card would earn right now, if the spend were split as 3% at restaurants, 10% on travel or when overseas, 2% for government payments, $12,000 on insurance and utilities, and the remainder on everything else:

Compare that to next year, where points earning goes up on insurance, utility and ‘everyday’ transactions, but drops on lifestyle and leisure spend, and the end result is much the same, based on this particular spending pattern:

Of course, cardholders who spend more heavily on dining, flights, hotels and overseas transactions will see a bigger impact of these changes when those higher earning rates are removed.

On the flipside, those with bigger insurance and utility bills may be better-rewarded, given the increase to those earning rates – ditto cardholders who primarily spend in the ‘everything else’ category.

As everybody’s spending habits are different, we’d encourage you to make your own calculations in the same way as above, to see where you stand.

2. Cardholders with the Platinum Charge Card + Explorer Card

With the Platinum Charge Card being great for perks, and the AMEX Explorer credit card being great for points on everyday purchases, many savvy spenders choose to have both.

This smart strategy relies on using the Charge Card for dining, airfares, accommodation, overseas and government spend, and the Explorer card for insurance, utility and all over ‘everyday’ transactions, to earn points at the highest possible rate on every purchase.

To illustrate the example, here’s what that same $150,000/year spend would look like for a cardholder maximising their points today, by using the Platinum Charge Card and the Explorer card in tandem:

(Note: the frequent flyer earning rates on the Explorer card used above assume this card remains attached to the Membership Rewards Gateway program, as designed.)

Compared to using the Charge Card alone, whipping out the Explorer card for everyday purchases delivers almost 70,000 extra frequent flyer points every year – more enough for an extra business class flight to Asia – while bonus points are still gained on dining, travel and when overseas using the Platinum card.

But fast-forward to next year and this strategy would no longer make sense, as everyday transactions made on the Explorer card drop from earning 1.5 to 1.0 frequent flyer points per $1 spent, while at the same time, the Charge Card increases its earning rate to 1.125/$1, making it the more logical card of the two to use for every purchase.

While you won't be earning more points than before on your overall spends – in fact, a reduction of 69,376 frequent flyer points per year compared to the current Charge + Explorer combo – using the Platinum Charge Card for every purchase delivers a better result under the new system than alternating between Charge and Explorer.

3. Spenders who always use the AMEX Explorer card

Currently with an uncapped earning rate equal to 1.5 frequent flyer points per $1 spent into a range of programs including Virgin Australia Velocity, Singapore Airlines KrisFlyer and others, the AMEX Explorer card is a common go-to on its own, particularly as its $395 annual fee is offset by a $400 Travel Credit.

But from April, that great earning rate drops down to 1.0 frequent flyer points per $1 spent: a 33% decline.

As this card has no points cap and one simple earning rate for everyday purchases (with an exception only for government charges), here’s how frequent flyer earnings will be affected based on yearly spend on everyday purchases:

 While the Explorer card’s headline earning rate remains the same at 2 Membership Rewards Gateway points per dollar spent, the value of those points changes when the frequent flyer conversion rates swap from 4:3 to 2:1, causing the impacts above, as outlined in our earlier coverage.

As with any points earning rate based around dollars spent, those who spend the most stand to lose the most, while those who spend the least are least-affected.

4. Changes for Qantas AMEX Ultimate Card customers

While the changes for cards attached to the Membership Rewards program are quite complex, for American Express cardholders with a Qantas-branded credit card, the concept is much simpler.

All that’s happening here is a reduction in the earn rate of 0.25 Qantas Points per $1 spent on everyday purchases, and on payments made directly to Qantas, such as for flight bookings or Qantas Club membership.

To show the impact across a variety of spending volumes, here’s the impact for a cardholder who spends 5% of their dollars directly with Qantas, 3% on government charges, and the remaining 92% on everything else:

The changes to this card are less impactful than for Explorer cardholders, because the everyday earning rate is only decreasing by 0.25 frequent flyer points per $1 spent, compared to the more significant reduction of 0.5 frequent flyer points per dollar spent on the Explorer card.

5. AMEX Velocity Platinum Card changes

As with the Qantas AMEX Ultimate Card, the AMEX Velocity Platinum Card sees its earning rates cut by a quarter of a frequent flyer point for every dollar spent on everyday charges – from 1.5 to 1.25 Velocity points per $1 – and on flight bookings with Virgin Australia (2.5 to 2.25 per $1 spent).

Accordingly, the effect this has on Velocity frequent flyer earning rates mirrors what’s happening on the Qantas card.

Here’s again what that looks like for cardholders who spend 5% of their money on Virgin Australia flights, 3% on government charges, and 92% on everything else:

For full coverage, read: American Express overhauls credit card frequent flyer points

Chris C.

Chris is a a former contributor to Executive Traveller.