I do not live in Singapore and you most likely do not, either.
Nevertheless I thought you might want to be aware of this because it could be a precursor of things to come here in the USA. In fact, I found this purely by accident. Just because this is for Singapore does not mean another schedule of restrictions, akin to this, could not be in the works right now for America. Anyway, here is the list and it is a LONG list:
There is also obviously the concern these limitations could spread beyond Citi to other credit card issuers.
Note carefully this is prospective and will not go into effect in Singapore until October. Also scroll down and see certain merchants headed for exclusion.
It strikes me there is more than one way to skin a cat and more than one way for CC issuers to lower their cost of rewards. Sure, they could lower rewards percentages across the board. But they also can do what you see there and exempt entirely certain categories of spending while maintaining the rewards percentage where it is now.
I’m pretty sure credit card rewards in other countries have never even come close to how good we have it in the US. It’s pointless to look at any new restrictions there. Although from a glance, it looks like they limited rewards for cash-equivalents, which is par for the course.
If your first sentence is true, your second is contradictory. I see things differently:
It is possible Citi is frontrunning a new “save money on rewards” strategy in Singapore to test it out in a small market. How will customers react? Will people cancel their cards, or sock drawer them? What would happen if we pull this stunt in far larger markets, e.g., the USA?
I agree they appear to be targeting charges which are cash equivalents, provided one broadens the definition of “cash equivalents” significantly from the one to which I am accustomed. Also, the PayPal exclusion is, in my view, significant. Everything I buy through PayPal is paid for with a rewards CC.
My only Citi card is their DoubleCash (DC) card, which might not even exist in Singapore. It is not on the list. DC has been a highly profitable card for me, but Citi has also been one of the most strict issuers with which I deal. It’s a strict and aggressive management style at Citi, and it would not surprise me were they to be contemplating, if not seeking out, ways to rein in their cost of rewards wherever they operate.
Citi already excludes banking transactions from earning rewards.
And do most of those categories even exist in the real world? Like “stored value card purchase” or Lotto tickets or any of the “quasi cash” categories? Such things arent typically allowed with credit cards, and/or they’re sold under a different MCC (like grocery store or gas station).
Insurance and Utilities are curious categories to target, along with the already mentioned parking meters.
Paragraph one is confusing - it says “(these listed cards) will be excluded from (rewards) issuance exclusion for transactions listed in paragraph 2.” It sounds like it is saying these listed cards are being excluded from the list of exclusions.
I was looking on the AMEX HK website to see their credit card offering, almost all of their cards have annual fee, it is a privilege to get a credit card there, so they charge you annual fee for it. Annual fee for Amex plat cost HK$7800, that’s about $1000 usd. it is $550 in the US.
in order to understand how good we have it in the US, you have to understand interchange fee. US merchants pay about 3% for every transaction. The rest of the world charge much less than 1%. Until there are some serious structure changes to the interchange fee, it will be business as usual for the US consumers.
I was operating under the assumption of roughly 2% . . . . WITHOUT really knowing. But the volume discount concept answers questions for me . . . stuff about which I have been wondering for a while. Aggregators, it seems to me, also could be granted a discount . . . . which would provide a rationale (though not the only one) for their existence.
how many merchants have this ability to negotiate on processing fees? not many. there are also a lot of hidden fees in that.
my point really is US interchange fee is hell a lot higher than other countries. I am in China, alipay eliminated interchange fee by letting everyone have a QR code, scan and pay. The result is literally every seller take e-payment Of course, alipay does charge merchant the processing fee, we are talking about 0.005% is how much they charge.
I agree with your thinking. However, realize here in America we also have aggregators. I have no way to know if aggregators also exist there in China. But here aggregators automate pooling of charges from a great many merchants and, as suggested to me by Bend3r, might be achieving a volume discount thereby.
Of course I agree that if a small, low volume, merchant goes in directly, then that merchant is going to pay the highest interchange fee rate.
Large merchants that can negotiate interchange fees aside, 3% isn’t actually the ceiling of card processing fees. First, the interchange fee is only a portion of the total % processing fees that merchants pay. Second, the interchange fees vary by card type (v, mc, whether it’s a business card, rewards card, etc).
On top of the percentage fees, there are other (somewhat) fixed fees that go into the whole cost to process credit/ debit cards, such as gateway fees, and other network fees. Merchants also have to pay things like chargeback fees (even if they win a chargeback) to their processor.
I doubt that even Walmart (even after taking into account volume and economies of scale) pays less than 1% in total credit card processing costs.
Square and other services are a different beast entirely from having your own merchant processing account. It may be fair to look at those as what a small merchant could pay for processing, it’s just not an apples to apples comparison.
~3% is the ceiling for flat rate services like square/PayPal/etc with no volume requirements and does not carry by card types. Agreed the ~1% average is only the really big merchants.
The only way any business would get above 3% is if they’re terrible at shopping for services and are essentially choosing to overpay and/or if their average transaction amount is very low. Or if they find added value with a different processor at a higher charge.
Square is 2.75% flat for card present transactions (no + per transaction fee). https://squareup.com/help/us/en/article/5068-what-are-square-s-fees. Or they have a 2.5%+10c/transaction setup. Or of course you pay more if you want higher risk/additional services like card on file /card not present/etc which don’t have a cash equivalent.