Capital One axes cashback credit cards and cuts perks for some existing customers

Banking and Borrowing

Updated on 10 April 2015 | 2 Comments

Firm pulls cards ahead of interchange fees cap and will remove or reduce cashback rates for some existing cardholders from 1st June.

Capital One has axed its cashback credit cards and is in the process of scaling back perks for some existing customers following a European Parliament decision to cap interchange fees.

The firm has removed its range of cashback credit cards from sale to new customers and is planning to remove or reduce cashback rates for some existing cardholders on "unsustainable products"  from 1st June.

Interchange fees

Last month the European Parliament voted overwhelmingly in favour of capping interchange fees. These are charges paid by retailers to card issuers when a debit or credit card is used as payment.

These hidden charges typically cost retailers 8p for debit card transactions and around 0.8% for credit card payments, which are often passed onto customers.

But under the new regulations coming into force later this year the fees will be capped at 0.2% for debit cards and 0.3% for credit cards. It’s estimated the move will lead to a €6 billion reduction in fees.

The move is designed to improve competition and transparency, but it’s feared credit card providers will axe rewards and 0% deals or charge higher fees in order to limit their losses.

Capital One’s decision to axe its cashback credit cards and scale back the perks for some existing customers is the first sign of this happening as certain cashback rewards will become “unsustainable” under the new market conditions.

Get a better deal on your cashback credit card

Existing customers

Capital One wouldn’t reveal which cards would be impacted by changes, but said affected customers are now being contacted.

What we do know is impacted existing customers can continue to earn cashback until 1st June. But after this date the cashback rate will either be reduced or ditched altogether.

Cashback accrued up until this date will be paid out to customers that will no longer be able to earn through their credit card.  

The firm also confirmed it would not be increasing any fees or charges as a result of the new rules.

Instead annual fees would be scrapped for affected customers, with those that have already paid for the year refunded.

Get a better deal on your cashback credit card

Alternative cashback credit cards

If you have a Capital One card and aren’t happy with the changes there are still other cashback credit cards out there that will offer a better deal.

The fee-free American Express Platinum Cashback Everyday card pays a market-leading 5% cashback on spends up to £2,000 (capped at £100) in your first three months with the account. Thereafter you can enjoy tiered interest depending on how much you spend. You’ll earn 0.5% on spends up £3,500, 1% on spends over £3,500 up to £7,500 and 1.25% on spends over £7,500. The card has an APR of 19.9%.

For a £25 annual fee you can get the American Express Platinum Cashback card which pays 5% cashback on spends up to £2,500 (capped at £125) within your first three months with the card. Thereafter the card will pay 1.25% on all purchases, which doubles in your anniversary month with the card. The card has an APR of 18.7%.

The Santander 123 Credit Card pays 1% on supermarket spending, 2% on department store purchases and 3% on petrol and train fares (up to £300). It also comes with a market leading 23-month 0% period on spending as well as 23 months 0% on balance transfers if you need it. The card has a £24 annual fee and an APR of 16.5%.

Those with a poor credit history can go for the Aqua Reward card. It pays 0.5% cashback on all purchases as long as you stay within your credit limit. The card will help you build up your credit rating and comes with a limit of between £250 and £1,200. You’ll want to pay off what you spend each month though as the card charges 34.9% APR.

For more of the best deals take a look at  The best cashback credit cards.

Get a better deal on your cashback credit card

More on credit cards:

The best first credit cards

The best air mile credit cards

The best 0% balance transfer credit cards

The best low-fee balance transfer credit cards

 

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