Credit card action now at the super-premium end

Credit card issuers are beefing-up rewards programs aimed at big spenders in a bid to grow share in the one part of the credit card market that is growing strongly.

In the past week, Commonwealth Bank has launched Diamond - a step up from Platinum and the first credit card in the Australian market to use MasterCard's World platform.

And Citibank, whose Select card uses the high-end Visa Signature platform, launched its Dining Program this week.  This offers extra points when dining at participating restaurants, plus other benefits. The program is an add-on for all Citibank cardholders.

The chief executive of Pinpoint Marketing Consultants, David Ojerholm, said credit card spending overall has been weak for the past couple of years, but spending on premium rewards cards has continued to go up. Pinpoint, which designs and runs rewards programs, manages the Citibank Dining Program.

Card industry consultant Mike Ebstein agreed with this analysis. The latest Reserve Bank payment data shows that consumers are using debit more and credit less when making card payments. Credit's share of card payments has fallen from 60 per cent a decade ago to 50.1 per cent today.

The value of credit and charge card purchases rose by 6.8 per cent over the 12 months to February, while the value of debit purchases rose 21.2 per cent over the same period.

Ebstein said interchange fees for premium and super-premium cards (which include CBA's Diamond and Citibank's Select) were as much as three times the average interchange fee. This has allowed issuers to develop rewards programs that would not be feasible for standard and gold cardholders.

Citibank Australia's chief executive, Roy Gori, said card issuers had changed the way they put rewards programs together. Instead of always buying the rewards, and having to recover that cost, they were using techniques such as joint-marketing programs to attract partners.

The Citibank Dining Program includes four points per dollar spent in the 250 restaurants included in the program, a free bottle of wine when dining at those restaurants, and a dining guide - a book made up of recommendations of chefs, sommeliers and other foodies. There is no joining fee and the package is available to anyone partaking in a Citibank rewards program.

The key feature of Commonwealth Bank's Diamond rewards scheme is that cardholders can redeem their points on anything. The program includes a concierge service: the cardholder calls the service to ask the concierge to find a chosen item. Alternatively, cardholders can buy items themselves (using the Diamond card) and then instruct the bank to use their points to pay for them.

When it comes to travel, Commonwealth has an arrangement with Flight Centre and offers cardholders access to a travel agent, and booking with any airline or hotel (Diamond cardholders can opt for the Qantas Frequent Flyer direct-earn program instead).

Commonwealth Bank's executive general manager cards, David Lindbergh, said the Diamond program had been designed in response to consumer complaints that there were too many restrictions applying to standard rewards and frequent flyer programs. "The theme of this program is customer choice," he said.

The annual fee is $425 and the cardholder must sign up for a minimum balance of $18,000. Lindbergh said it would make sense to upgrade from Platinum to Diamond if spending was $55,000 to $60,000 a year.

Another feature of the Diamond program is that it has a high points cap. Cardholders earn 1.25 points per dollar spent on the MasterCard and three points per dollar on the companion American Express card. Cardholders can earn a maximum of one million points a year, compared with caps of 250,000 points for most Platinum programs.

The annual fee for Citibank Select is $700. Citibank is looking for customers who spend upwards of $50,000 a year on credit. Select cardholders earn two points per dollar spent, with no cap on points.