Tesco Bank halves Clubcard points for credit card customers
Latest provider to scale back perks thanks to upcoming interchange fees cap.
Tesco Bank is reducing the rate its credit card holders can earn Clubcard points when spending outside of Tesco, blaming a looming cap on interchange fees coming later this year.
Currently 2.8 million cardholders can rack up Clubcard points when spending using a Tesco credit card, wherever they spend.
But soon the points Tesco World MasterCard and Clubcard Credit Card holders can earn on purchases made outside of the supermarket will change from one for every £4 spent to one for every £8 spent.
Tesco’s 700,000 World MasterCard (withdrawn from sale in 2006) holders will be the first to be impacted from 1st November, while the remaining 2.1 million Clubcard Credit card customers will see the change from 1st December.
The points available normally through the Clubcard scheme and by shopping with a Tesco credit card in Tesco stores and on Tesco fuel will remain unchanged.
Why is this happening?
Tesco Bank says it’s had to make the changes to prepare for the cap on interchange fees coming into force on 9th December.
Interchange fees are charges paid by retailers to card issuers like MasterCard and Visa when a debit or credit card is used as payment.
Typically these hidden fees cost merchants 8p for debit cards and around 0.8% for credit card transactions – charges which often get passed onto customers.
But the European Parliament voted to cap these fees back in March to improve competition and transparency.
So by the end of the year issuers will only be allowed to charge retailers 0.2% for debit cards and 0.3% for credit cards.
Impact of the changes
The move is estimated to save UK retailers £480 million a year, which it is hoped will be passed onto customers in the form of lower prices.
But at the same time, profits will slide for credit and debit card providers, which means perks will have to change.
Tesco Bank says its uses the profit from interchange fees to fund Clubcard benefits and so has to make adjustments in order for the scheme to continue.
It’s the fourth provider to scale back credit card perks thanks to the change in legislation.
Capital One was the first to react by withdrawing its range of cashback credit cards from sale in April and scaling back perks for existing customers in June.
NatWest and Royal Bank of Scotland followed, scrapping the YourPoints scheme that paid 1p per £2 on purchases in July.
A Tesco Bank spokesperson said: “While we are disappointed that the industry changes have resulted in the need to reduce the Clubcard earn rate on our cards when they are used outside of Tesco, we have worked hard to ensure that our credit cards continue to offer great value for customers. We are committed to offering the most rewarding cards we can.”
Is this the end of reward credit cards?
Credit card deals issued by Visa or MasterCard are likely to have to change as a result of the interchange fee cap.
However, American Express issued cards should be safe for a while yet as the firm is not subject to the cap for at least the next three years.
American Express provides a range of reward credit cards for things like airmiles, cashback and Nectar points.
Check out the best air mile credit cards, the best cashback credit cards and the best reward cards to see how they compare.
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