European consumers who’ve piled up substantial cash back earnings from heavy Capital One card use will lose this perk beginning Monday, according to a report from the Guardian. Industry analysts predict this could be a substantial move by Capital One and other card providers to end reward schemes, meaning card providers will need to tweak interest rates or offer introductory bonuses to keep consumers interested in frequent card usage.
Although there’s no formal announcement posted on Capital One’s main website regarding this change, new European Union regulations regarding interchange fees made this move inevitable. Capital One, among other companies like Santander, were able to offer cash back rewards due to relationships with major retailers who’d offer kickbacks for mentions and closed sales in their internet or physical locations. With new regulations capping interchange fees between 0.2 percent for debit transactions and 0.3 percent for credit sales, Capital One has been forced to trim fat somewhere — which, as it usually does, gets passed to the consumer. A recent article from the Sunday Express estimates this new mandate will cost credit card providers £2.4 billion.
Royal Bank of Scotland and NatWest are axing their YourPoints perk on July 1 and ask that all customers spend available points by October 31. American Express and Santander may move ahead of Capital One in terms of customer loyalty as they’ve not formally announced sweeping changes to their perk systems to date. Experts predict a major rift in cash back and other rewards schemes is inevitable across all credit card providers, not just Capital One. It’s unclear if changes to European law will slash perks for Capital One consumers in America.
Capital One customers who pay their balance in full each month will take the hardest hit, sources indicate. Couple that with an APR increase to 20.6 percent and customers of Capital One and similar banks across Europe may simply decide to walk away from the privilege since many signed up for credit cards for their cash back perks. Instead of increasing annual fees or maximizing the penalty APR rates, banks are attempting to scale back financial losses incurred by the interchange fee dump.
Known as the subprime lender generous in helping young consumers establish credit, Capital One has found itself jumping in and out of major headlines. From being sued for militia-like lending to having the ability to show up on your job, Capital One customers from Europe and North America, and news followers in general, have fond (and not so fond) memories of Capital One corporate announcements, but none as heartbreaking as this.