[Australia – Opinion] AMEX Devaluation – Time to Cancel? No.

[Australia – Opinion] AMEX Devaluation – Time to Cancel? No.

It’s been a whlie since I’ve written for Australia.

If you’re looking for a one word answer, my answer is a resounding no. I’m focusing primarily on the AMEX Explorer, which I’ve referred to as the “Best all-rounder Credit Card” in the Australian market. Does the devaluation change this? No – it is still the best all-rounder. It’s just not as good – which goes to show how good it was pre-devaluation.

Back in November 2018, American Express Australia announced changes to their Cards, both in terms of earn rates and redeem/burn rates.

The devaluation has been hotly discussed on the dedicated Credit Card blogs (think Australian Business Traveller and Point Hacks), and I’ve learnt a great deal from both sites over the years and in terms of what to do with this impending devaluation.

I’m going to talk about:

  • What To Do (briefly)
  • Why You Shouldn’t Cancel, and My Competitor Analysis of Why
  • A list of potential objections and why they’re not necessarily valid

Here are my thoughts, and I’ll try not to overlap with other blogs too much.

Think About What Upcoming Redemptions/Flights You Intend to Make

This is pretty straightforward.

If you have imminent travel plans, it’s probably a good time/idea to look into which AMEX partner’s program will be more useful to you, and then transfer points over by April 14, 23:59 AEDT.

If you can’t think of anything, I would probably recommend you transfer the points to Velocity (Virgin Australia) because their points expiry policy is quite generous. That is, the points in your account will be valid for 24 months from the last earn/burn activity. So, if you keep earning (which is not too hard, especially in Australia), your points will remain active. Velocity also has decent availability and pricing, especially for domestic Australian flights.

Another option is Marriott – but I would consider this to be a more “advanced” transfer option and you need to think ahead of what you plan to do next. What program do you wish to transfer to after that? Or are you after a hotel redemption instead?

“Screw you AMEX! I’m cancelling my card”

That is fine… but I hope you are doing it out of rationality rather than pure rage. I can’t tell you what to do, but personally, I still don’t think there are better cards than the AMEX Explorer & Platinum Edge.

The AMEX Explorer, post-devaluation, will still earn the equivalent of 1pt/$, in a currency which is still more versatile than a lot of the competition. ANZ, Citibank, CBA, NAB, St George and Westpac all have rewards points that can convert to the likes of Singapore Airline’s KrisFlyer, Cathay Pacific’s Asia Miles, Virgin Velocity and Qantas Frequent Flyer. However, let’s see if it’s actually any better.

Analysis of Competitors and Potential Points Earn

  • ANZ Rewards:
    • 1500 = 500 Asia Miles/KrisFlyer
    • ANZ Rewards Black earns 2pts/$ up to $5000/mth (i.e. 1 Asia Miles/KrisFlyer per $)
  • CBA Rewards:
    • 2 Awards Points = 1 Velocity
    • 2.5 Awards Points = 1 Qantas Frequent Flyer
    • CBA Diamond Credit Card earns 1.25 Awards Points/$ (0.66 Velocity per $, or 0.5 Qantas Point per $)
  • Citibank Rewards:
    • 2.5 Citibank Reward Points = 1 KrisFlyer
    • 2 Citibank Reward Points = 1 Velocity
    • Summary: Citi Prestige Card earns at 3pts/$ (1.5 KrisFlyer/Velocity) on overseas spend, or travel, hotel and dining in Australia. 2pts/$ on supermarkets/petrol stations, and 1pt/$ (0.5 KrisFlyer/Velocity) on everything else. Oh, the annual fee is $700.
  • NAB Rewards:
    • 3000 NAB Rewards Points = 1000 Asia Miles
    • 3000 NAB Rewards Points = 1000 KrisFlyer
    • 3000 NAB Rewards Points = 1500 Velocity
    • Earn 1.25 NAB Rewards Points/$ on the NAB Rewards Signature Card (0.42 Asia Miles/Krisflyer/$ or 0.625 Velocity/$). Annual fee of $295.
  • St George Amplify:
    • 3000 Amplify Points = 1500 KrisFlyer
    • 3000 Amplify Points = 1500 Asia Miles
    • 3000 Amplify Points = 1500 Velocity
    • The St George Amplify Signature earns 1.5 Amplify points/$ (0.75 KrisFlyer/Asia Miles/Velocity). Factor in the 10% Birthday month bonus and it goes up to 0.83 KrisFlyer/Asia Miles. Annual fee is $279.
  • Virgin Money High Flyer Credit Card
    • 1 Velocity Point/$ for first $8000/mth.
    • Annual Fee: $289
    • Virgin Australia Gift Voucher (annual): $129
  • Westpac Altitude Rewards:

Comparison/Analysis Methodology

I simplified the comparison by ignoring the following:

  • Sign-up bonuses (However, sign-up bonuses often make cards worth applying for in itself)
  • Reduced first year annual fee – I’m looking long-term, and none of them are fee-free for the first year
  • “Lower-tier” Credit Cards, because whilst they have a lower annual fee, they also either offer the same in the way of points earn rate, or offer less
  • Primarily focusing on earn rates into KrisFlyer/Asia Miles/Velocity
  • Qantas Points – primarily because the mainstream AMEX cards can’t get you Qantas points anyway
  • Minimum income requirements and interest rates (you shouldn’t be paying a cent of interest on Credit Cards anyway, otherwise you’re using them wrong)
  • The fact that we’re comparing Visa/Mastercard to AMEX. Not that it doesn’t matter, but if a place does not accept AMEX or accepts it with a huge surcharge, then just don’t pay with it?
  • Inclusion of Lounge Access/Travel Insurance
  • Bonus points in certain categories – not that it’s not important, but unless you actually spend a lot in such a category (in which case, you’ll be right to consider the card), it’s somewhat less relevant to the masses

Of the cards I’ve mentioned above, not a single one offers an earn rate superior to that of the AMEX Explorer. Furthermore, they all have hefty annual fees, whilst the AMEX Explorer offers a Travel Credit of $400, which goes a long way to offsetting the $395 annual fee.

The Virgin Money High Flyer is probably the most competitive and balanced from a cost vs benefit perspective, but it is significantly hampered by being a Velocity-specific card. It is also the only card that “matches” the Explorer for earn rate, at least for the first $8000 monthly.

“But the AMEX Explorer has a $395 annual fee”

It also includes a $400 Travel Credit. Effective use of this makes the AMEX Explorer effectively a “fee-free” card.

But I want a Visa/Mastercard as a backup”

Then get one. I’m just saying that there’s still no mainstream card that offers a better earn rate than the AMEX EXplorer.

Holding one Credit Card does not deprive you of the opportunity of holding another card. However, I want to stress that this line of thinking should not have been triggered by the AMEX points devaluation. It has always been somewhat important to have a Visa/Mastercard “backup” for serious points collecting.

No one accepts AMEX anyway, or the surcharges are too high

This was and always has been the case, and the situation does not change with the devaluation. My answer/response/recommendation has always been the same.

  • If they don’t accept AMEX, well, you have no choice anyway. Pay with a card they do accept (or pay cash if they don’t accept any card)
  • If they accept AMEX with a surcharge, then decide whether the surcharge is worth paying for or not (my rule of thumb is if the surcharge is greater than 1%, I won’t pay it)

Also, here’s why having AMEX cards are advantageous, but in summary, you don’t get anywhere near the volume of promotions on Visas/Mastercards as you do with AMEX. Even when Visa/Mastercard offer similar promotions, they’re typically not as attractive as AMEX promotions and are offered at a reduced frequency. Take Shop Small, for example.

But then I won’t be eligible for future AMEX Sign-up Bonuses

True. But:

  • You’ll have to be AMEX-free for 18 months before you become eligible, which is not a short amount of time
  • There are plenty of cards in the market that offer sign-up bonuses, and I’d argue that there are enough to keep your credit history well and truly active
    • I base this on my self-imposed limitation of applying for cards at a rate typically that does not exceed once per quarter

So.. if you wish to cancel for this reason, it would be because you feel your expenditure is so low and/or AMEX Statement Credit promotions are irrelevant to you such that holding onto an AMEX is actually not significantly advantageous.

Don’t forget – by cancelling, one of the biggest disadvantages is of depriving yourself of a great way to earn points on ongoing general expenditure

Other cards have higher sign-up bonuses

They often do. Apply for them too. But don’t cancel your AMEX Explorer to sign up for those, unless you’re actually required to cancel one card to free up your credit limit for this other card with a great sign-up bonus. If you actually need to cancel to sign up for another card, then yes, I would consider doing it, but I’d try to cancel another card in my portfolio first.

I’ve found earning points too slow/hard on the AMEX Explorer

That’s fair. But do you feel there’s a card that will actually earn you points faster? Earning points is not, and never will be, a “get rich quick” scheme, or anything along the lines of that. It’s a way to get some return rather than no return on expenditure, as I touched on in “Why You Should Never Pay with Your Debit Card” and “Credit Cards Give You “Free Money””.

Earning points from expenditure has never been, in my opinion, the “best” way to earn points, especially for those with lower expenditures. I’ve always considered sign-up bonuses to be a much quicker way, which is why I’ve written specifically about it.

Furthermore, if you feel that way, jump to another Credit Card if you believe it will offer you a faster earn rate. I’d be curious to know which card you wish to jump to, so let me know below!

Keep in mind:

  • Not all point currencies are the same
    • i.e. 2 ANZ Rewards Points are not “roughly the same value” as 2 Qantas Points or 2 KrisFlyer Miles
    • This is just like how 1 AUD is not the same as 1 NZD
  • Annual Fees
  • Your personal lifestyle may actually mean another card is better for you (because it offers more relevant benefits). I’m not here to say that the AMEX Explorer is definitely the best for every single reader.

I’m Angry At the Devaluation and I Want to Teach AMEX A Lesson

In my opinion, the outcome will be:

  • At Best: They’ll offer you a retention bonus points offer to stay (which is actually great!)
  • At Worst: They’ll say bye to you, and you now got rid of your AMEX Card(s). Life goes on, and AMEX continues to live.

The reality is, devluations are normal. Loyalty programs do not go through inflation in a way similar to “real” currencies.

AMEX were way ahead of the competition and there was no reason for them to be so far ahead, and I guess they realised this.

When it comes down to it, they will still probably offer the best rewards program in the country, and for this reason alone, it will probably be enough for them to survive and not “re-improve” their offering.

If they aren’t doing better than the competition, they will lose customers, and they could possibly re-think their strategy. Just be rational – that’s my recommendation.

In conclusion, don’t cancel your AMEX Explorer unless you’ve actually thought it through properly!!

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