I have written extensively about the new European Union regulations on credit card interchange fees which came into effect last week.
You could (note, could) have summarised the situation as follows:
- The EU is capping the interchange fee (roughly equivalent to the fee charged to shops) on credit card transactions at 0.3%. Historically this has been around 0.8% for Visa and MasterCard transactions.
- Debit card transactions are capped at 0.2%
- Only Visa and MasterCard are impacted
- American Express is NOT impacted directly. Additionally – and this is important for our niche – Amex cards issued by MBNA, Lloyds and Barclays are not impacted until 2019.
We have already seen the some major changes in the market:
- Tesco has halved the rewards paid on the Tesco Clubcard MasterCard
- HSBC Premier will halve the miles paid on its card from January
- Many non-travel cards have also changed their reward structures. Some, such as NatWest with Your Points, have abandoned rewards entirely.
Could it get any worse? It just has.
On 8th December, the Payment Systems Regulator (PSR) – the part of the Financial Conduct Authority which oversees the implementation of this law – made an announcement. You can read it here.
American Express cards issued by MBNA, Lloyds and Barclays will NOT get a three year grace period. With immediate effect, the interchange fee on these cards must be cut to 0.3%.
This has come about because the PSR has decided to impose a clause in the rules which exempts any card company with a market share of above 3% from the grace period. American Express has a UK market share of above 3%.
This is, admittedly, just a temporary ban until 31st March when a final ruling will be issued. It is difficult to imagine how the final ruling will be any different, however.
What does this mean for loyalty credit cards?
What it appears to mean is the end of the American Express / Visa or American Express / MasterCard double pack.
As Amex cards issued by third parties are now restricted to the same 0.3% fee as Visa and MasterCard, it is pointless to continue issuing them.
Unless the final ruling in March sees a dramatic turn around, we will presumably see the removal of American Express cards from the BMI, Lufthansa, Lloyds Avios, TSB Avios, Etihad, Emirates, Virgin etc credit card ‘double packs’. This will mean that only the low-paying Visa or MasterCard option will remain.
This ruling has no impact on American Express cards issued directly by Amex
For clarity, Amex cards issued by Amex itself are not, and will never be, impacted by these EU rules.
This means that the British Airways, Starwood, Nectar, Gold, Platinum, Platinum Cashback, Green, Harrods etc cards will continue as they are.
Don’t count your chickens too soon, though. With Visa and MasterCard charge cut to 0.3% from 0.8%, shops are less likely to want to pay the typical Amex charge of 1%+. If Amex is forced to cut its fees to retain key contracts, this will be passed on in the form of lower rewards.
The squeeze on your rewards credit card just got tighter, I’m afraid.
Want to earn more points from credit cards? – January 2021 update
If you are looking to apply for a new credit or charge card, here are our January 2021 recommendations based on the current sign-up bonus.
British Airways American Express
5,000 Avios for signing up, no annual fee and a companion voucher for spending £20,000 Read our full review
British Airways American Express Premium Plus
25,000 Avios and the UK’s most valuable credit card perk – the 2-4-1 companion voucher Read our full review
American Express Preferred Rewards Gold
Your best beginner’s card – 20,000 points, FREE for a year & two airport lounge passes Read our full review
The Platinum Card from American Express
30,000 points and an unbeatable set of travel benefits – for a fee Read our full review
Virgin Atlantic Reward+ Mastercard
15,000 points bonus and the most generous non-Amex for day to day spending Read our full review
Earning miles and points from small business cards
If you are a sole trader or run a small company, you may also want to check out these:
American Express Business Gold
20,000 points sign-up bonus and free for a year Read our full review
American Express Business Platinum
40,000 points sign-up bonus and a long list of travel benefits Read our full review
British Airways Accelerating Business American Express
Earn both Avios and BA On Business points with your business spending Read our full review
Capital On Tap Business Rewards Visa
The most generous Avios Visa or Mastercard for a limited company Read our full review
Disclaimer: Head for Points is a journalistic website. Nothing here should be construed as financial advice, and it is your own responsibility to ensure that any product is right for your circumstances. Recommendations are based primarily on the ability to earn miles and points and do not consider interest rates, service levels or any impact on your credit history. By recommending credit cards on this site, I am – technically – acting as a credit broker. Robert Burgess, trading as Head for Points, is regulated and authorised by the Financial Conduct Authority to act as a credit broker.