Westpac kills merchandise redemptions as NZ banks thin credit-card rewards

Westpac New Zealand has removed merchandise from its hotpoints credit-card catalogue. The bank said the channel accounted for only 7 percent of points redemptions. The change took effect from 30 July 2026, according to Westpac’s terms notices.

In its place sit personalised, merchant-funded cashback offers. Customers activate them in the Westpac One app or online banking. Cashback then credits the card after a qualifying purchase at a participating retailer.

Westpac still offers hotpoints Pay. That tool lets cardholders clear past transactions or fund future spend with points. MoneyHub puts the conversion at 667 hotpoints for $3 of statement credit — about 0.45 cents per point, or roughly 0.45 percent back on a standard 1-point-per-dollar earn.

That base yield is thin once annual fees enter the picture. Westpac’s hotpoints World Mastercard charges $285 a year, Canstar and Westpac product pages show, with a purchase rate of 16.95 percent p.a. and up to 44 interest-free days when the balance is paid in full. Fee refunds apply only at very high six-month spend thresholds such as $50,000.

Illustrative cashback deals published with the shift look far richer on paper. Examples include $50 back on a $300 Michael Hill spend (about 16.7 percent), $5 on $50 at JB Hi-Fi (10 percent), and $10 on $35 at The Coffee Club (about 28.6 percent). Those rates apply only if the offer is activated, the minimum is hit, and the shop is a participating merchant. They are not an always-on rebate on all card spend.

Westpac framed the redesign as matching changing habits. Managing director of product, sustainability and marketing Sarah Hearn said customers want rewards that feel more personal and easier day to day. Head of everyday banking product Simon Macdonald said classic points still scale with spend, but cashback is not solely a function of how much goes on the card. Westpac also cited survey data that 38 percent of New Zealanders hold a rewards-earning credit card and another 34 percent were open to one.

Massey University banking expert Claire Matthews noted merchandise only helps if it is what the holder wants. Cash is more flexible when households face cost pressure. From the bank’s side, she said merchandise exposes the issuer to inflation and inventory complexity, while cash is a fixed liability.

The move sits inside a multi-year compression of New Zealand credit-card rewards. Westpac itself tiered earn rates on credit and debit rewards in October 2022 after Commerce Commission interchange settings narrowed merchant-fee revenue that once funded points. BNZ cut the cash value of its rewards points from 1 February 2026; MoneyHub described a 26 percent devaluation. Kiwibank ended Airpoints on its cards in October 2025, with MoneyHub estimating a large cardholder exodus. ASB has moved toward a 44-day interest-free limit already common across major-bank packs.

MoneyHub’s 2025/26 comparison ranks American Express Airpoints Platinum ahead of major bank Airpoints cards on pure earn — about one Airpoints Dollar per $70 spent on the Platinum product, versus bank co-brands that now require roughly $110–$220 per Airpoints Dollar at higher spend bands. Interchange caps on Visa and Mastercard domestic transactions do not apply to Amex in the same way, which is the structural wedge banks cannot close with catalogue tweaks alone.

Consumer NZ’s standing advice remains the break-even test. High headline reward rates usually pair with high fees. Only heavy, disciplined spenders who clear the card every month clear the fee hurdle. Average users often fare better on a low-fee, low-rate card. One unpaid cycle at mid-to-high teens purchase rates can erase years of 0.45 percent statement-credit economics in a single month.

Who wins under Westpac’s new mix is clear enough. Heavy monthly payers who stack activated merchant offers with hotpoints Pay can still extract value. Participating retailers shift part of the loyalty cost onto their own marketing budgets and steer foot traffic. Light spenders on premium-fee cards should walk. The catalogue “treasure chest” is gone; what remains is conditional activation marketing co-funded by shops, not an open-ended issuer rebate.

Over the next 12–24 months, expect more app-native personalisation and further pressure on mid-tier rewards cards that cannot clear fee hurdles. Westpac’s 7 percent SKU cull is rational ops hygiene. It does not reverse the sector-wide thinning of card perks under regulated interchange. Households that treat rewards as free money without watching fees and APRs will keep funding bank margins the old-fashioned way.