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The Government turns the screw even further on your reward credit cards

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I have written extensively about the new European Union regulations on credit card interchange fees which came into effect last week.

This article covers the key information.

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.

UK Rewards credit and charge cards

We have already seen the some major changes in the market:

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? – June 2021 update

If you are looking to apply for a new credit or charge card, here are our June 2021 recommendations based on the current sign-up bonus

You can see our full directory of all UK cards which earn airline or hotel points here. Here are the other top current deals:

British Airways American Express card

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

BA Premium Plus American Express card BAPP

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

Nectar American Express

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

American Express Platinum card Amex

The Platinum Card from American Express

30,000 points and an unbeatable set of travel benefits – for a fee Read our full review

Virgin Rewards Plus credit card

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 offers.

Amex American Express Business Gold card

American Express Business Gold

20,000 points sign-up bonus and free for a year Read our full review

Amex Platinum Business American Express

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 card

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

Comments (74)

  • Charlie says:

    Slightly off topic, Would I receive a referral bonus if I refer someone who currently holds a plat amex charge card but is looking to cancel it and replace with gold charge card? I know the rules for them will mean no 20K bonus but not clear on referral.

    • Rob says:

      Good question, honestly don’t know.

      It works the other way – ie if you have already referred 5 people, the person you refer still gets a bonus even though you don’t.

  • Gavin says:

    Presumably no chance of the double packs being withdrawn, just no longer issued?

  • Amtexfly says:

    Could card issuers just increase the spending required to get bonus points?

    • Andrew (@andrewseftel) says:

      In theory, but the cut to profit is much sharper than the cut to revenue. That 0.3% has to pay for marginal fraud and funding costs, which doesn’t leave a lot remaining.

  • Mark says:

    Why is Amex issued Amex exempt but Barclays issued Amex is not?

    • Andrew (@andrewseftel) says:

      The regulation doesn’t apply to ‘two party’ card schemes where the retailer deals directly with the issuer.

      • Will says:

        AMEX is three party.

        ‘three party payment card schemes’ (cardholder − acquiring and issuing scheme − merchant) and
        ‘four party payment card schemes’ (cardholder − issuing bank − acquiring bank − merchant).

        • Rob says:

          I agree that, when I read the original press release, that is what I thought too. However, when you dig into the full document, it is clear that it is only talking about four party schemes run by three party operators.

          Amex-issued cards are exempt because Amex runs the whole process. This clamp down i meant to restrict the profits of the intermediaries who are running an oligopoly.

  • Gblb1030 says:

    great post. I do hate the interchange fees being sucked away. when does AMex exempt status go away?

    • Rob says:

      Amex-issued Amex cards remain exempt, permanently.

      • SoloFlyer says:

        I wouldnt be surprised to see the likes of Virgin Atlantic and some other companies rushing to Amex if MBNA cuts the earning rates.

        • RIccati says:

          With the BA’s attitude, and all the BA Amex card cancellations, there is a strategic decision to be made about a tie up with Virgin. It is the smaller clientele but a profitable one (Virgin flies to the US and Caribbean).

          With £150 fee, £3000 spent and a meagre 25000 bonus, BA Premier AMEX is very much unattractive. There is 2-4-1 but for Asia there are Qatar fares, Etihad redemptions and Turkish sales. For NA there are ex-Dublin and generally ex-EU fares on American.

          • lady London says:

            Virgin ain’t going many places anymore now.
            I am wondering if the rest of Virgin will end up being taken into Delta anyway.

          • Callum says:

            No, because that would be illegal.

  • Will says:

    Are you sure about AMEX issued ones will be exempted? From the PSR website, it states that

    “Therefore, our provisional conclusion is that American Express and any payment service providers participating in the American Express scheme must comply with the interchange fee caps on UK domestic transactions until 31 March 2016.”

    Seems it covers both AMEX own ones and Barclays/MBNA ones?

  • Simon says:

    Gutted about the probable impact on the bmi/diamondclub cards 🙁

  • Adam says:

    Had a quick look through but couldn’t see anything on this. I have the Lloyds Avios rewards; does this ruling mean Lloyds can change T&Cs on my earnings now? Or does it only apply to new customers?

    • Rob says:

      As your card has a fee they won’t change anything mid year, it would wait until your next renewal.

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