The end of reward credit cards? Don’t lose out - Credit cards - News - Moneyfacts


The end of reward credit cards? Don’t lose out

The end of reward credit cards? Don’t lose out

Category: Credit cards

Updated: 03/06/2015
First Published: 02/06/2015

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Last week, Moneyfacts revealed that interest rates on credit cards have hit a record high following the announcement of a cap on interchange fees. But, not only are consumers now charged an average of 20.6% APR – up from 19.9% APR a year ago – there are growing concerns that reward and cashback credit cards could soon become a thing of the past. So how can you make sure you don't lose out?

Why the concern?

It's all down to changes to the way that providers accrue fees. The EU has placed a cap on interchange fees – the fees charged between banks for processing card payments – that will come into effect in October. The fee is designed to cover operating services and is charged during the transaction process, when your bank sends the payment to the retailer's bank and deducts a small fee.

But, the changes mean that there'll be a maximum amount that credit card providers can charge – it'll fall from as much as 1.85% per transaction to a maximum of 0.3% – and it's denting profitability. Unfortunately, consumers are paying the price: those who don't pay their balance off each month are being charged more for the privilege, and many reward and cashback schemes are being scrapped.

Capital One axed its cashback scheme for new customers yesterday (existing customers will also find their offer reduced or removed), and RBS recently announced that it's closing its YourPoints reward scheme from July. There are fears that others could follow suit, and that "if they decide that the offers are no longer sustainable, they will remove or reduce them quickly", said Rachel Springall of Moneyfacts.

There are even concerns that lengthy 0% interest deals could soon be a thing of the past, while cards that charge monthly or annual fees could become more popular as providers try to recoup their losses. Those that diligently pay off their cards each month to benefit from perks will be the hardest hit, added Ms Springall, so just what can you do to make sure you're still able to make the most of your spending?

Make the most of your spending

If you're one of the customers who's lost out by Capital One withdrawing from the rewards market, the answer is simple – transfer to a new card! There are still some decent cashback offers available (we outline a few of them below), so you may not need to lose out at all. The same applies to RBS customers – you can still earn points for just under a month and will need to redeem those rewards by October, but there's nothing stopping you from getting a different card in the meantime.

If you don't use reward cards yet, then you won't be losing out, but you'll probably still want to maximise your spending. You could opt for cards that charge 0% interest on purchases if you don't pay off the balance in full each month, for example, or even low rate credit cards if they'll suit your needs better. Below, we outline a few of the top deals available to suit all circumstances, so you can make the most of your spending no matter what.

Top credit card deals…

  • … for cashback. If you're still hungry for some cashback goodness, your best bet will be opting for an American Express card. American Express isn't bound by the EU rules – it's only Visa and MasterCard that are affected – so hopefully, their deals won't be stopped any time soon! The top two options are as follows, one fee-free and one with a higher cashback rate:
Representative purchase APR (variable) Card details

American Express

Platinum Cashback Card
18.7% APR
  • Introductory 5% cashback for first three months, capped at £125
  • 1.25% cashback thereafter
  • 2.5% cashback in the anniversary month when you spend £10,000 in the year
  • £25 annual card fee
  • Emergency cash service available

Representative purchase APR (variable) Card details

American Express

Platinum Cashback Everyday Card
19.9% APR
  • Introductory 5% cashback for first three months, capped at £100
  • Standard 0.50% cashback on spending up to £3,500 per year thereafter; 1.00% on spending between £3,501 - £7,500; 1.25% on spending over £7,501/year
  • No annual fee
  • Emergency cash service available

Alternatively, you may like to consider the popular Santander 123 Credit Card MasterCard, which comes with a £24 annual fee and offers 1% cashback for spending in supermarkets, 2% for department store spends and 3% for spending up to £300 on train fares and fuel. However, Santander hasn't yet ruled out the possibility of making any changes to its offer, so it could be worth holding fire.

  • … for 0% purchase cards. If you're not able to comfortably repay your credit card balance in full each month, or are planning a big purchase, you may like to consider cards that offer 0% interest on purchases to give you time to pay it off. Here are the top picks:
Representative purchase APR (variable) Card details


123 Credit Card MasterCard
16.5% APR
  • 0% on purchases and balance transfers for first 23 months
  • Introductory balance transfer fee of 0%
  • Cashback of 1% for spending in supermarkets, 2% for department stores and 3% for spending on train fares and fuel (but there are no guarantees that this will last)
  • £24 annual card fee

Representative purchase APR (variable) Card details


Clubcard Credit Card for Purchases MasterCard
18.9% APR
  • Introductory 0% interest on purchases for 21 months
  • 0% on balance transfers for 3 months (fee of 2.90%)
  • No annual fee
  • Earn Tesco Clubcard points (5 points for every £4 spent at Tesco, 1 point for every £4 spent elsewhere)

  • … for low rate cards. If you just want to keep things simple with no introductory offers or fees, opting for a card that offers a standard low rate could be just the thing. Bank of Scotland's Platinum Low Rate MasterCard charges just 6.4% APR, as does Halifax's Low Rate Credit Card MasterCard, so they could be worth considering.
  • … for rewards. There are still reward credit cards out there that offer decent perks, but just remember that they could still come under fire from the new ruling. The exception once again is American Express, and its British Airways card could be ideal for those who enjoy a bit of travelling – you can earn 1 Avios for virtually every £1 spent and can collect 9,000 bonus Avios when £1,000 is spent in the first three months. Plus, if you spend £20,000 on the card in 12 months and redeem the Avios on a British Airways flight, you'll receive another ticket for the same flight and cabin, absolutely free!

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.

Related Articles

Reward credit cards that become ‘pointless’

If you regularly use cards to pay at the till, you may have considered opening a reward credit card to earn points every time you spend. However, not all of these cards are as rewarding as they may seem…

It’s looking to be a credit Christmas

We are now less than 70 days away from Christmas, and with 70% of people admitting they haven’t started saving yet, millions will be needing to play catch-up - and plenty planning to turn to credit for some Christmas spending relief.

Can no credit score be as damaging as a bad one?

Debt is becoming an increasing problem, which is why those who have no credit commitments often feel pretty smug about it. However, while not relying on credit is admirable, having no credit score can actually be just as damaging as having a bad one.