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Death of the cashback card? Nationwide cuts cashback scheme

New customers to Nationwide’s Select Credit Card will no longer be offered cashback on purchases – while existing customers will see their rates slashed. But can you still benefit from cashback schemes? Nationwide has announced its cashback rate will drop from 0.5% to 0.25% for existing customers from 11 January 2018, and new customers will not be offered cashback at all.

The move follows new EU rules limiting the fees which retailers and card issuers can charge. Which? looks at other cashback deals on the market and why card issuers are winding down their cashback schemes.

What cashback deals are available?

Currently, the Nationwide Select Credit Card offers one of the more competitive cashback deals[1] on the market – but cutting the rate to 0.25% will move it to the bottom of the pack. A number of other providers offer cashback deals which pay 0.5% or above on purchases.

But bear in mind that benefits like cashback are only one element of choosing a card – you should also consider the APR, which shows you an annualised interest rate, and any card fees. The Santander card, for example, charges a ?180 fee.

Why is Nationwide cutting its cashback scheme?

Nationwide is just the latest in a long series of providers who have withdrawn cashback offers in recent years. CapitalOne ended its reward cards in April 2015, with RBS and NatWest ending their ‘YourPoints’ scheme a month later.

Santander withdrew its 123 credit card in October last year. In June this year, Barclaycard announced[2] it was ending its relationship with American Express, which offered a 1% cashback deal, and moving customers to a Visa card offering just 0.5%. In explaining its decision to curtail the cashback scheme, Nationwide pointed to the decrease in card fees that credit card issuers could charge, which made the program more expensive.

Previously, card issuers were entitled to charge retailers a fee for processing their payments – and this fee was often passed onto customers as a 2% to 3% surcharge. Since the end of 2015, card issuers have faced a cap on the fees charged retailers, currently 0.3% for credit cards. From 13 January 2018, retailers will also be banned from charging customers[3] a fee to use their cards online or in stores.

Both changes are part of a raft of EU regulation aimed at improving payment services. As a result, the cost of transactions has been rising for card issuers, who have begun scaling back on ‘perks’ – including cashback. Other card providers are likely to face similar financial pressures in coming months.

Should I get a cashback card?

When choosing a credit card, cashback deals can be a tempting money-making offer – but it’s important to look beyond the perks.

If you can’t clear your balance monthly, interest payments are likely to wipe out any rewards you’ve received. You may also have to shop at certain stores, or use certain airlines to get the most benefit – and these won’t always offer you the cheapest deals. The Which?

Money Compare credit card tables[4] 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. Which? Limited is an Introducer Appointed Representative of Which?

Financial Services Limited, which is authorised and regulated by the Financial Conduct Authority (FRN 527029). Which? Mortgage Advisers and Which?

Money Compare are trading names of Which?

Financial Services Limited.

References

  1. ^ cashback deals (www.which.co.uk)
  2. ^ Barclaycard announced (www.which.co.uk)
  3. ^ banned from charging customers (www.which.co.uk)
  4. ^ Which?

    Money Compare credit card tables (moneycompare.which.co.uk)

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