The ultimate guide: American Express Membership Rewards changes 2019

The ultimate guide: American Express Membership Rewards changes 2019

The American Express Membership Rewards program is about to undergo a wide-ranging overhaul, with the changes coming into effect on 15th April 2019. The changes will obviously have a significant impact on the way cardholders use their Amex personal and corporate credit cards and charge cards.

Rather than rush to the press with breaking news, while the dust settles we’ve taken the time to complete an in-depth analysis of what the modifications will mean for you, in terms of both points earning rates and points redemption rates.

For a full list of every change, go here

But first, an overview.

What’s not changing

celebrate

Starting with some good news, there are no changes anticipated at this stage to card features other than points earning and redemption.

This means no changes to:

  • Annual fees
  • Interest rates on unpaid purchases balances
  • Interest-free days
  • Complimentary benefits like insurance cover and airport lounge access
  • Rewards points being available with EVERY card issued by American Express
  • Absence of points expiry dates
  • Absence of points caps or thresholds

What is changing

Now for news that’s good in some cases, not so good in others.

. . . the good news

good news

What were the three most annoying features of using an Amex card? 

  • A low level of card acceptance 
  • Those complicated tiered earning rates
  • Only getting 0.5 points per $1 on payments to the government 

Well, hold onto your seats, because these are all going to improve.

Greater card acceptance

Undoubtedly, the premier irritation used to be that Amex cards (in common with Diners Club cards) were often declined in places where Mastercard and Visa cards were accepted. Or if they were accepted, they often attracted a surcharge levied by the retailer in order to recover the higher merchant fees charged by American Express. And it is still the case that, where surcharges exist for all types of card, the surcharge for using an Amex card is often higher.

However, it’s already true that Amex cards are more widely accepted than ever before, and mostly without a surcharge, at supermarkets, petrol stations, bottle shops, department stores, and almost everywhere in the dining and travel industries, as well as in eCommerce. And according to American Express, it’s going to get even better. They say that they have not only

‘. . . had to close the gap between our price and the merchant fees of competitors’

but that they are also are investing in ways that will

‘ . . . expand the number of places where our Cards are accepted and where our Card Members can earn points.’

Less complicated points-earning tiers

I love changes

The second annoyance – and this only applies to some Amex cards, not all of them – was the often complicated tiered points earning structure. It was possible to earn points at 3.0, 2.0, 1.0 and 0.5 points per $1 spent using the same card, depending on where you were doing your spending. No one really wanted to carry this spreadsheet-worthy information in their head, just so that they could determine whether they were extracting the maximum points benefit from their card.

Amex appears to have listened to its customers, because from April 2019 those tiers, where they exist, will mostly become less complicated. They won’t disappear altogether, but on the whole, where there were four tiers (3,2,1 and 0.5 points) there will now be only three, and three-tier cards will now only have two.

Increased government payment points earn rate for Membership Rewards (but not for frequent flyer points)

While Amex’s low 0.5 points per $1 for government payments was a sore point with some cardholders (mainly those with a hefty tax bill), it’s worth remembering that many Mastercard and Visa cards still don’t offer any points at all when you pay the ATO, Australia Post, or indeed any government bodies.

The good news is that the 0.5 Membership Rewards points per $1 is set to increase to 1.0 points from April 2019.

However, the government payment earn rate for Amex cards linked to Qantas or Velocity frequent flyer programs will remain at 0.5 per $1 spent.

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Improved points earning rates on some cards

JFallon excited

The final piece of welcome information is that the points-per-dollar rate will increase on some cards. Sadly, the rate will decline on a few cards (disregarding the improved government payment earning rate) while for some it will remain stable.

Cards with improved earning rates include:

  • The American Express Essential Credit Card
  • American Express Platinum Card*
  • American Express Business Card
  • American Express Gold Business Card
  • American Express Platinum Business Card

*Highest points tier (restaurant spending) eliminated, but overall effect is likely to be an improvement

And for these cards the earning rate will be unchanged (except for tier changes and an improved rate for government spending):

  • American Express Explorer Credit Card 
  • American Express Platinum Edge Credit Card
  • American Express Business Explorer Credit Card

There’s no news yet about what will happen to the points earning rates on the following cards: 

  • American Express Qantas Business Rewards Card
  • The American Express Velocity Business Card
  • American Express David Jones Credit Card
  • American Express David Jones Platinum Credit Card

. . . and the not-so-good news

The points earning rate will drop for these cards:

  • Qantas American Express Discovery Credit Card  
  • American Express Qantas Premium Credit Card 
  • American Express Qantas Ultimate Credit Card 
  • American Express Velocity Escape Card 
  • American Express Velocity Platinum Credit Card 

Overall, the news so far on points earning rates is good for high-end and business cards, but less hopeful for cards linked to frequent flyer programs.

But the points earning rate is only half the story

there's more

If the changes ended at this point, they would be relatively easy to get your head around, and not too unsettling.

However, there’s more.

Not only are the points earnings rates changing from April 2019, but also the points redemption rates. The points cost of $100 gift cards to spend at national retailers will increase from either 10,000 or 13,500 points (depending on your Membership Rewards program tier) to 20,000 points. The exchange rate for converting Membership Rewards points to Velocity or Singapore Airlines points will decline sharply from 1:1 or 1.33:1 (depending on which card you have) to 2:1.

So, in order to work out the dollar value returned to you for each $1,000 of credit card spending, you need to look not only at how many points you will earn for that $1,000 spent, but what you will get in return once you redeem them.

In order to calculate this, we had to make some assumptions (based on average household expenditure data sourced from the ABS) about the types of spending made by a typical cardholder, to conform with the Amex tiered spending categories.

For the $1,450-per-year American Express Platinum Card, we increased the amount spent on restaurant meals to $10,000, and added a further $10,000 for travel and accommodation.

Here are the results for four popular American Express Cards.

Upcoming changes to Amex cards

Looking at the above table, the American Express Platinum Card emerges with the best result, with its cardholders likely to see an increased gift card value per $1,000 spent, coupled with only an 11% decline in frequent flyer points conversion. This is mainly because this card’s points earning rate for the ‘All other spending’ category will jump dramatically from 1.0 points per $1 to 2.25 points, while the rate for restaurant spending falls only slightly, down from 3.0 to 2.25 points.

Holders of other cards are likely to see a decrease in both gift card and air miles value per $1,000 spent, only slight in the case of the American Express Essential Credit Card.

In terms of cents or percentage returned in gift cards per dollar spent, the range for these cards will be 0.6 cents (0.6%) to 1.0 cents (1%) from April 2019, which is very competitive when compared with other rewards cards. More about this shortly.

Bearing in mind that these results are for a fictional ‘typical cardholder’, you may want to redo the calculations based on your own expenditure pattern. See ‘Business card rates are changing too’, below, for instructions on how to do this.

Frequent flyer program cardholders don’t need to worry about points redemption rates – but earning rates will fall

Holders of Amex cards linked to the Qantas and Velocity Frequent Flyer programs are most likely to use their points for Qantas and Virgin Australia award flights, where the points redemption rates are set by the airlines, not American Express. So frequent flyer cardholders only need to consider the changes to earning rates, not the unchanged redemption rates.

Earning rates will fall by 0.25 points per $1 for the ‘Qantas products’, ‘Virgin Australia products’ and ‘All other spending’ categories, while the 0.5 points per $1 for government spending is unchanged.

So from April 15th 2019, the points earning rates for ‘All other spending’, for personal  frequent flyer cards, will change as follows:

  • Qantas American Express Discovery Credit Card: reduced from 1.00 to 0.75 points per $1
  • American Express Qantas Premium Credit Card: reduced from 1.25 to 1.00 points per $1
  • American Express Qantas Ultimate Credit Card: reduced from 1.5 to 1.25 points per $1
  • American Express Velocity Escape Card: reduced from 1.00 to 0.75 points per $1
  • American Express Velocity Platinum Credit Card: reduced from 1.5 to 1.25 points per $1

Business card rates are changing too

While it is possible to look at where the average household spends its money with a reasonable amount of accuracy, there’s no such thing as the average business (especially if the card is used to pay tax to the ATO). So it isn’t possible to do the same ‘return per $1,000 spent’ analysis for business cards.

Whether or not your business will benefit or lose from the changes depends largely on the major categories into which your expenditure falls. Here is the information, so that you can do your own calculations if you wish.

AMEX Business card changes april 2019
AMEX Business card changes april 2019

The new points earning rates are all good new for business cardholders, and once again, it’s the Platinum card which stands out as benefiting most. However, the points redemption rates will decline for all cards.

Membership Rewards points transfers to Hilton Honors will also change, from 1:1 to 2:1, but Starwood Preferred Guest transfers remain at 3:2.

To work out the likely effect on your business, take your spending category amounts for the whole of the last financial year, and multiply by the current points earning rate for each category. Convert the resulting points total into your preferred redemption, using current redemption rates. Now repeat the exercise using April 2019 earning and redemption rates. Compare the results to see where you stand.

Comparing April 2019 Membership Rewards returns per $1,000 spent, with returns from competing cards

Finally, let’s put all this into perspective by looking at how American Express personal cards will stack up against their competitors from April 2019, using the $100 retail gift card as a comparison yardstick.

We can’t include the American Express Platinum Card in this comparison because it has no real competitor, but for the remaining three personal Amex cards we’ve examined so far, the results are in and look like this.

AMEX still beats competitors

As you can see, despite the reduction in Membership Rewards redemption rates, American Express cards remain super competitive when compared with cards which have a similar annual fee.

Also bear in mind that the $100 gift card is far from being the only way to measure a card’s value.

Don’t forget to consider the fact that American Express cards have no cap or threshold on points earning, allow points to be earned on spending with government bodies (unlike many other cards) and are often loaded with complimentary benefits.

So, should you worry about the changes?

There’s no doubt that the value you can extract in terms of gift cards or air miles will decline for many personal Amex cards from April 2019.

However, it’s a different story for Amex business cards. The jury is still out, and only business owners themselves will be able to tell whether the marked improvement in earning rates will more than compensate for the decline in redemption rates.

But—and this is the most important point—when Amex cards are compared with their competitors, they still deliver outstanding rewards value.

So, should you worry about what’s going to happen in April 2019?

Probably not, but you’re the only one who can decide. That’s why we work hard to give you the very best comparison tools at Credit Card Compare, so that you can make an informed decision.