NISA Credit Card Accumulation Points Drop: Time to Switch Brokerages?
New NISA has been in operation for less than a year, and now it’s getting worse!
From 2023 to 2024, companies competed to attract new NISA accounts with the credit card accumulation point rewards as a key feature. However, less than a year after the start of the new NISA, multiple downgrades have emerged. Wasn’t the foundation of NISA supposed to be long-term investment? Many may feel deceived. Therefore, this article will explain the rules and precautions for switching brokerage firms.
The deterioration of credit card accumulation is malicious.
As reported multiple times by FRIDAY Digital, 2024 saw a series of negative changes to credit card services. Among them, the reduction in the point return rate for credit card savings is likely to be categorized as malicious.
In March 2024, Sumitomo Mitsui Card announced a significant revision of the point return rate starting from purchases made in November. Points will no longer be granted unless annual usage exceeds 100,000 yen (for credit cards with no annual fee). The au Pay Card reduced its point return rate from 1% to 0.5% starting with December purchases.
Credit card savings refer to a service where investment trust savings are paid using a credit card. Points are returned based on the amount saved, and the service can be used not only with NISA’s investment savings account but also with the growth investment account. If you save tens of thousands of yen, a considerable amount of points can accumulate, leading to research showing that more than half of people using the investment savings account use credit card savings.
For online brokers, the lineup of investment trusts available for purchase through NISA is nearly the same. Therefore, the point return rate for credit card savings became a major selling point to encourage account openings, and from the second half of 2023, when the new NISA was introduced, online brokers competed to highlight their high return rates. However, as mentioned, within less than a year of its launch, there was a continuous stream of negative changes.
The point redemption service resulted in a loss!
“I initially thought it wouldn’t last long since it was a service running at a loss, but I didn’t expect changes to happen this quickly.”
The surprise is clear from Kenji Matsuoka, a financial writer well-versed in credit card matters.
“After emphasizing the importance of long-term investment through NISA, they suddenly start making negative changes to the service. I understand focusing on short-term profitability, but they might lose the most important thing—the trust of their customers.” (All quotes below are from Matsuoka.)
Indeed, profitability is tight. The profit securities companies earn from investment trusts is called the agency fee and is generally one-third of the “management fee” for the investment trust. The management fee is the fee that investors pay to financial institutions while holding the trust.
For example, the management fee for Japan’s most popular investment trust, the eMAXIS Slim U.S. Stocks (S&P 500), which is very popular in NISA, is 0.09372% per year (tax included). Since it is split between the three companies: the securities company, the management company, and the trust bank (with the sales company sometimes taking more than a third), the agency fee is 0.03124%. That’s about 1/35th of 1%.
Therefore, if they offer a 1% point return, considering management costs, it is estimated that it would take around 4 to 5 years for the securities company to break even. While some of the points granted may be shared by the card company, the basic structure remains the same since the management fee itself is minimal.
