Changes to European legislation designed to protect consumers from being charged for using their cards could have a negative impact by limiting perks …
Changes to European legislation designed to protect consumers from being charged for using their cards could have a negative impact by limiting perks such as cashback.
Under the new law, card companies will no longer be able to charge shops and restaurants extortionate fees for processing non-cash transactions. Instead, there will be a limited so-called interchange rate of 0.3 per cent for credit cards and 0.2 per cent for debit cards.
The idea is that the legislation will not only protect merchandisers but also customers who often end up bearing the cost of the fees.
However, there are concerns among critics who believe the credit card companies will look to recoup the money they have lost through other means.
Their fears are not unfounded as so far Avios, Sainsbury's Bank and Capital One have all announced there will be changes to the perks they give for purchases made on plastic.
Capital One has stated it will be cutting back, and in some cases eliminating cashback on a number of its cards. It laid the blame squarely at the new legislation that is meant to protect retailers and prevent it from passing the charges on to the customer.
In a statement it said: "Changes in our industry mean it is no longer sustainable for us to offer cashback on your card. This is because the fees we receive when you use your card are reducing."
Despite some banks and credit card companies changing their offerings, there are some that are keeping their perks, so it may be worth considering shopping around when applying for plastic. Obviously it is also important to view the interest rates, interest-free period and transfer and cashback fees that may be applied.
Only once all these issues have been considered, is it possible to make an informed decision.