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financial services

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Nationwide is just the latest in a long series of providers who have withdrawn cashback offers in recent years.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)

£10m a month handed out in stamp duty refunds

HMRC is refunding around ?10m a month to home buyers who have fallen foul of the government’s buy-to-let stamp duty surcharge. A 3% surcharge for investors and people buying second homes brought total stamp duty receipts to a record ?2.6bn in the last quarter – but it’s also affected many normal home movers. In total, around ?185m has been refunded to 15,000 buyers since the introduction of the new rules in April last year.

Here, we take a look at how buyers are being affected by the tax, and explain how you can work out how much stamp duty you’ll need to pay.

  • If you’re just starting the process of buying a home, you can get impartial, expert advice on finding the right mortgage by calling Which? Mortgage Advisers[1] on 0808 252 7987.

Home movers face initial surcharge

Under the current system, anyone who buys an additional home – either as an investment property or holiday home – needs to pay a surcharge of 3% on top of normal stamp duty rates[2]. While the rules aren’t targeted at people who are simply selling their current house (or ‘primary residence’) and buying a new one, many home movers are being caught up in the system.

When people complete on their new home before selling their existing one, they are technically ‘buying a second home’ – movers in this situation will need to pay the surcharge up front and then claim it back. Buyers can get their money back within three years, but the lack of a grace period between buying and selling properties means some movers are shelling out thousands more up-front than they might have expected.

  • To learn more about whether you’ll need to pay the stamp duty surcharge, check out the Q&A in our full guide on buy-to-let stamp duty[3]

Stamp duty surcharge: how it works

The additional rates apply to anyone buying a property over ?40,000, and can add a significant amount on to your bill. The table below shows how the system works for standard buyers (meaning those buying a primary residence) and those who need to pay the additional rate.

Portion of property price Standard rate Buy-to-let rate ?0-?40,000 0% 0% ?0-?125,000 0% 3% ?125,001-?250,000 2% 5% ?250,001-?925,000 5% 8% ?925,001-?1.5m 10% 13% ?1.5m+ 12% 15%

For example, take a ?250,000 property:

Standard rate of stamp duty

  • Portion 1: ?0-?125,000 – 0% tax
  • Portion 2: ?125,001-?250,000 – 3% tax = ?2,500.
  • Total: ?2,500

Additional rate of stamp duty

  • Portion 1: ?0-?125,000 – 3% tax = ?3,750
  • Portion 2: ?125,001-?250,000 – 5% tax = ?6,250
  • Total: ?10,000

Buy-to-let stamp duty calculator

If you need to pay stamp duty at the higher rate, you can find out how much your total bill will be using our buy-to-let stamp duty calculator. If you’re buying a property that isn’t eligible for the additional rate of stamp duty, you can use our standard stamp duty calculator[4].

Exchanging contracts

You can avoid paying a stamp duty surcharge by completing on both of your properties[5] at the same time – although this isn’t always possible.

Indeed, a recent report found that four in ten buyers and sellers face delays[6] at this step of moving home. The government is currently consulting[7] on ways it can speed up the home moving process in the future.

Proposed stamp duty reforms

The latest figures show that stamp duty receipts are up 23% in a year – but some have argued that the tax is dampening down the housing market. With that in mind, some MPs have proposed sweeping reforms to the system, with speculation heating up ahead of the Autumn Statement.

In the last few months alone, proposals to cut stamp duty for first-time buyers and downsizers, to offer tax breaks for energy efficient homes[8], or to pass the tax onto sellers have all been voiced. Despite the rumours, however, there’s been no clear indication the government is seriously considering an overhaul in this month’s Budget speech[9]. Your home may be repossessed if you do not keep up repayments on your mortgage.

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. ^ Which?

    Mortgage Advisers (mortgageadvisers.which.co.uk)

  2. ^ stamp duty rates (www.which.co.uk)
  3. ^ buy-to-let stamp duty (www.which.co.uk)
  4. ^ stamp duty calculator (www.which.co.uk)
  5. ^ completing on both of your properties (www.which.co.uk)
  6. ^ four in ten buyers and sellers face delays (www.which.co.uk)
  7. ^ currently consulting (www.which.co.uk)
  8. ^ tax breaks for energy efficient homes (www.which.co.uk)
  9. ^ Budget speech (www.which.co.uk)