Australia's card fee cap could end free travel insurance perks Oct. 1

Australians who travel long-term and lean on the complimentary travel insurance bundled with their credit cards should not count on that perk lasting. From October 1, the Reserve Bank of Australia is cutting the consumer credit card interchange fee cap from 0.8% to 0.3%, a change that squeezes the income banks have used to fund rewards, lounge access and free insurance.

What changed

The interchange fee is what merchants effectively pay when you tap a card. Australia's new 0.3% cap is a 62.5% reduction from the current level and takes effect October 1, alongside a ban on surcharges for eftpos, Mastercard and Visa debit, prepaid and credit payments. The commercial credit card cap stays at 0.8%.

The Reserve Bank expects the combined changes to cut bank revenue by roughly $660 million a year, according to The Sydney Morning Herald. The RBA is not ordering banks to drop travel insurance, but analysts point to it as one of the benefits typically paid for out of interchange income.

Some issuers have already moved. MyCard ended complimentary international and domestic travel insurance, plus Australian rental vehicle excess cover, on certain cards for eligible purchases made from May 15. ANZ and NAB have announced cuts to other benefits such as rewards and lounge access, the Herald reported.

A separate rule is also coming: from April 1, 2027, Australia will cap interchange on foreign-issued debit, prepaid and credit cards at 1% for transactions acquired in Australia. That measure does not directly affect insurance attached to overseas-issued cards.

What it means for nomads

If you hold an Australian card and have been treating its bundled travel insurance as a free, guaranteed line in your budget, that assumption no longer holds. Standalone coverage may become a separate expense you have to plan for.

Expats and long-term travelers are especially exposed. Card-linked policies often carry restrictions on trip length, age, residency and required activation spending even before any benefits are trimmed. A policy that technically still exists may not cover a multi-month trip abroad.

What to check

Before booking anything, review the updated product disclosure statement for your card. Pay attention to:

• Whether travel insurance is still included at all
• Activation spending requirements
• Maximum trip duration
• Medical coverage and cancellation limits
• Residency conditions

Don't assume existing coverage carries through the October reforms unchanged. If your card's protection is being cut or capped, pricing a dedicated long-term travel or nomad insurance policy now is the safer move than discovering a gap after you've already left.

Originally reported by Stamped Nomad.