KUALA LUMPUR, March 31 – If you’ve been saving up on your credit card reward points for a special redemption, you may want to scrap that plan and redeem whatever you can soonest possible. Malayan Banking Bhd (Maybank) has already issued letters to credit card holders advising that its redemption point system is revised upwards from May 1, and other credit card issuing banks are in the midst of doing the same.
For Maybank, the revision means 400 Treats points will equal RM1 compared to just 250 Treats points currently. For its cash back scheme, the conversion will be done in RM100 blocks only rather than whichever amount applies at the conversion date. The change in reward point redemption is part of an industry-wide change taking place from July 1, due to the Payment Card Reform Framework issued by Bank Negara Malaysia (BNM).
In the framework concept paper, BNM said reward or loyalty point schemes offered by local financial institutions for credit cards are now being unfairly run. It noted that the cost of such loyalty programmes is funded largely through merchant fees or merchant discount rates (MDR) – now amounting to between 1.5% and 2.5%. “Merchants are likely to recover such cost through higher price of goods and services. Consequently, cardholders pay for such benefits through higher cost of goods and services.”
The inherent unfairness in such loyalty programmes is due to basic credit card holders getting less benefits compared to premium card members – like those holding platinum or higher-ranked credit cards, BNM noted. “Members of the public who do not have premium cards or do not use payment cards are likely to end up subsidising the loyalty programmes given to the premium cardholders.”
BNM further said the loyalty points and cardholders’ incentives fuel increases in the MDR and lead to inflationary pressure on the prices of goods and services. “The higher MDR also deters small merchants from accepting payment cards, thus hindering the wider acceptance of payment cards in Malaysia.” As MDR will likely to be cut from July 1, this move by BNM has triggered the loyalty point redemption changes by credit-card issuing banks.
