What's happening to cash back credit cards?Capital One cuts back on cash back deals

13 April 2015

credit cards lined up neatly in black wallet

A new cap on the fees that credit card companies charge retailers could hit the number of cash back credit card deals available to consumers. 

European Union regulations, to be introduced this month, will reduce the 'interchange fees' that credit card companies can charge retailers for accepting card payments to 0.2% at most for debit cards and 0.3% at most for credit cards. 

Capital One has responded to the new laws by stopping offering cash back credit cards to new customers. The company will also scrap or reduce the earnings on some of its cash back deals for existing customers from 1 June. 

The company said some cash back and rewards products would keep their full benefits, but 'non-sustainable' products would have rewards reduced or removed. It would not give specifics of which products were and were not affected.     

According to the European Commission, these fees bring in an estimated £6.5 billion a year for credit card companies. There are suggestions that if the new rules significantly reduce the revenue earned from these fees, other credit companies may follow Capital One's lead. 

The end of cash back credit cards?

Cash back credit cards, which give you a percentage of your overall spending back as credit paid to your card, are popular; they are the most searched-for type of credit card on Which? Money Compare credit card tables so far in 2015.  

They are popular because they provide regular payments, but in the light of the new rules and Capital One's response you should keep an eye out for any changes that mean your card becomes less useful.

Credit card companies can remove cashback incentives at any time. However, many credit card companies, including American Express, Barclays, NatWest and RBS provide 30 days' in notice in writing before doing so.  

As many cash back credit cards charge an annual fee, you could find yourself left with a card which is costing you more than you're earning from it if the cash back rates fall. 

Which? Money Compare table - Cash back credit cards - find a great deal

Alternatives to cashback credit cards

The Which? Money Compare credit card tables are updated daily and let you search hundreds of cards from providers large and small to choose a great deal based on quality of service as well as cost and benefits. 

As well as cashback credit card deals, the tables feature dozens of reward credit cards, which allow cardholders to earn incentives such as airmiles or discounts and vouchers with certain retailers.

Which? Money Compare Table - Reward credit cards - dozens of cards compared   

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This article was amended on 15 April 2015.