Capital One customers to lose out as it slashes cashback

http://www.theguardian.com/money/2015/may/31/capital-one-slashes-cashback-eu-rules-credit-card-providers

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Consumers racking up hundreds of pounds of cashback a year from spending on Capital One credit cards will soon be out of pocket. From Monday, one of Britain’s biggest credit card providers is slashing this perk for current users and axing it for new ones.

The changes come ahead of new EU restrictions to cap so-called “interchange fees” from October. These are paid by retailers to card providers when a debit or credit card is used to pay for goods. The new rules cap these fees at 0.2% for debit and 0.3% for credit transactions. At present, fees range from 0.45% to 0.95%, according to David Black, director of DJB Research.

Card providers such as Capital One have been able to offer cashback cards because they made money every time someone spent in a shop or over the internet. The cards paid customers up to a generous 5% cashback, but the amount they will earn in future will be much lower, typically 0.5% or 0.25%.

Experts say the move could signal the end of reward schemes, further cuts to cashback offers or rising interest rates from other providers.

Andrew Hagger of website Moneycomms.co.uk says: “As well as cutting reward benefits, watering down cashback offers or increasing interest rates, we could see promotional 0% purchase and balance transfer deals become less prominent. Plus, there is the possibility that we’ll see more cards introducing a monthly or annual fee.”

Rachel Springall from financial analyst Moneyfacts.co.uk says: “These enticing deals were never designed to be offered forever, and with the new EU ruling on interchange fees coming into place in October, many card providers will be reviewing schemes to see whether they are sustainable.”

She adds that NatWest’s Cashback Plus credit card has a 10% cashback offer that’s ending at the end of June. “So customers need to be quick to maximise returns using this offer.”

Other popular cashback cards include Santander’s 123, which pays up to 3% on spending on petrol and national rail travel, with a £24 annual fee.