New EU Ruling Drives Up Credit Card Costs, Triggering the End of Reward Schemes
Wednesday, 10 June 2015
The average interest rate charged on credit cards has soared, reaching record heights, and has brought the future of customer reward schemes into question, as the EU rule to place a cap on interchange fees.
The total cost of the rule change to card issues is thought to be somewhere in the region of £2.4billion, a cost that is being passed on to consumers.
As a direct result of this ruling, the average credit card APR has increased to 20.6%, the highest it’s ever been according to Moneyfacts.co.uk.
In addition to the APR hike, most card issuers are also making moves to either suspend or scale back their cashback and reward schemes in a bid to make savings.
In June Capital One will be closing their cashback scheme for all new customer, with a number of offers being reduced or removed for existing cardholders.
RBS and NatWest have also announced plans to suspend their YourPoints card scheme in July, with cardholders having until the end of October to redeem any remaining points.
“Fears for the future of reward cards have increased, as their demise in the wake of the new ruling by the EU on interchange fees becomes a distinct possibility.” said Rachel Springall, from Moneyfacts.co.uk.
“In light of this ruling, providers will need to find other ways of recouping their costs. Aside from adding to card fees, various methods are likely to be weighed up. One option is to raise the underlying interest rate, but one of the easiest is to withdraw reward schemes or interest-free offers.”
“Some providers may currently be sitting on the fence as to whether they will pull their cashback deals, but if they do decide that the offers are no longer sustainable, then they will remove or reduce them quickly.”
“Those who diligently pay off their card debts each month to make the most of these perks will take the biggest hit if their offer is pulled.” she added.