Cull of the cashback credit cards

A new EU rule is forcing big names to axe their loyalty perks. Will your card be next?

CASH perks and rewards on credit cards are being culled as banks face a £4.3 billion cut to the fees they are allowed to charge shops and restaurants.

Waitrose, nectar, Capital one and Avios (formerly Air Miles) are among big names that have cut back on deals for loyal customers.

others, such as MBnA, are understood to be considering axing perks.

some of the reductions in rewards have been forced on firms because of a new european rule that caps the amount card companies are allowed to charge retailers who accept credit card payments.

Capital one — which pays up to 5p cashback to customers every time they spend £1 on their credit cards — said its deals were no longer sustainable following the eU ruling. From June, shoppers with Capital one cards are likely to earn far less.

Whenever someone uses a credit or debit card, the shop or restaurant pays the card issuer — Mastercard, visa or American express — a transaction fee.

In Britain, shops pay an average 8p every time a customer pays for something with a debit card. But fees on credit cards are higher — roughly 0.8 pc on the cost of purchases.

now, the eU has said these charges are not transparent and so must be limited. Under rules due to come into force in october, fees will be capped at 0.3 pc on credit cards and 0.2 pc on debit cards.

It is expected to cost card firms — and save shops — around £4.3 billion.

the catch i s that part of the transaction fees that card companies receive from stores are used to give perks to those who use certain cards. they come in the form of cashback of up to 5 pc or reward points, such as those awarded by Avios.

Because of the cutbacks, other loyalty perks could be under threat. In April, Avios announced changes that mean it’s no longer as generous.

At the moment, members build up points, which they can use to get money off British Airways, Iberia and Flybe flights. But from the end of the month, the type of ticket you buy and which class of seating you choose will dictate how many points you receive.

It’s a move that could restrict the number of points earned for many customers as, previously, it was a simple case of each mile you flew earned you one point.

so, if you book the cheapest seats on a 2,000-mile trip, you’ll receive only 500 points, rather than 2,000.

since saturday, nectar has halved the number of points you earn for each pound spent.

shoppers currently get two points for every £1 at sainsbury’s, Homebase an d BP pet ro l stations. each point is worth half a penny.

sainsbury’s customers will also no longer receive a point for every one of their own bags they use.

Cashback and perks are still around — for now. the American express Platinum everyday card offers an introductory cashback rate of 5 pc for the first three months up to a maximum £100. After this, it pays 0.5 pc on spending of up to £3,500 a year, 1 pc from there up to £7,500 and 1.25 pc on everything higher. Customers who spend £1,000 a month can earn £198.75 a year.

However, not all retailers accept Amex cards.

santander’s 123 card also pays a generous amount of cashback. You get 3 pc when you buy petrol or rail tickets, 2 pc on any spending in department stores and 1 pc in supermarkets.

It also has the longest interestfree period on new spending at 23 months. there is a £24 annual fee, but customers with a 123 bank account do not have to pay this in the first year.

A Marks & spencer credit card isn’t the best available on the High street but, for regular customers, it pays one point for every £1 you spend in store.

It also gives one point for every £2 you spend elsewhere, which equates to 1 pc and 0.5 pc cashback respectively. Premium current account holders get triple points in store. Four times a year, the points are converted into vouchers — 100 points gets you £1.

the tesco Clubcard scheme is more generous than nectar — paying 1 pc. tesco automatically converts accumulated points into vouchers each month, but you can also spend them at a range of other stores with the opportunity to double their value at various times in the year.