Is this the end for cashback credit cards?


Is this the end for cashback credit cards?

If you use a credit card to scoop cashback every time you shop, you could be in for a disappointment. New EU regulations have reduced the 'interchange fees' that credit card providers are allowed to charge to retailers, meaning some are already scrapping their cashback deals.

What are the new rules?

Last month, the European Parliament announced new rules set to come into force in April 2015 about the way we shop. The regulations will put a limit on the fees that debit and credit card companies are allowed to charge to retailers whenever you use your card to pay for goods. These are known as interchange fees and will be capped at 0.2% for debit cards and 0.3% for credit cards.

You might be thinking what the heck are these fees anyway? The fact is that you don’t see or hear of them as retailers just include them in the price of goods and services – but we all still pay for them. The European Parliament has said that this will mean a great saving for consumers, as it hopes that retailers will cut their prices as they don’t have to foot the bills for big interchange fees any more.

How does this affect me?

It seems that customers might not see any of these savings, as there are fears that retailers could just pocket the difference and keep their prices the same. This would mean no change to the status quo – we’d just keep paying the same as what we paid before the new rules.

The regulations will mean the credit card companies will see a drop in income, so they might take extra steps to trim their costs too. This could mean they’ll cut the cashback deals or rewards “points” schemes they offer whenever you use your credit card to pay for goods in shops. It’s not just scare-mongering either – some of the big providers, including Capital One, have already they’re scrapping their cashback or rewards deals, with some others putting their offers under review.

So no more reward deals?

Don’t panic and cut up all of your credit cards right away though! Not all providers are getting rid of their reward deals. Some credit card companies still offer cashback deals to try and attract customers in the hope that they’ll then be tempted to switch to another card they offer. There are also still a few credit cards that offer other reward deals, such as air miles, vouchers and discounts in certain shops.

However, the number of card providers that offer deals is shrinking, and we’re likely to see even more announcing that they’re cutting their offers. Hopefully the new EU rules won’t mean customers will completely lose out though – with the recent supermarket prices wars, some of the big stores could take this chance to cut prices even lower, so we could still bag a saving.