Banks withdraw cashback incentives

Consumers looking to get cashback incentives on their bank accounts and credit cards will be disappointed to find that many incentives are being withdrawn and the number of cashback credit cards available on the market has fallen to just eight.

Since the beginning of this year, a number of banks have withdrawn or reduced their cashback incentives, with more changes planned over the coming months. For example, last week Santander announced it was changing the cashback offered on its current account range from October and would be increasing the account fee on its 123 Lite Current Account, which comes just months after it had capped the cashback offer on the account. Meanwhile, earlier this year NatWest scrapped its cashback offer on bills on its Reward Current Account.

Research carried out by Moneyfacts.co.uk has found that this year, the number of cashback credit cards available to consumers has fallen to its lowest level in 10 years.

Cashback credit card deals have been falling since January 2016, when there were as many as 20 cashback credit card deals available on the market. The reason for the fall in cashback deals on credit cards has been in part as a response to European Union cap on interchange fees. These fees were paid by retailers to card issuers when a debit or credit card was used as payment and could cost retailers up to 8p per debit card transaction and 0.8% per credit card transaction. These hidden fees were usually passed onto the customer.

Soon after the cap on interchange fees took place, banks began withdrawing their cashback credit card deals. Now, consumers will struggle to get a credit card that offers a cashback incentive, especially on a credit card that does not charge a card fee. For example the top cashback credit card deal comes from American Express, which charges an annual fee of £25 and offers 5% cashback for the first six months, capped at £125 and then 1% cashback on spend between £1 to £10,000 per year and 1.25% on spend over £10,000 per year.

While the number of cashback credit cards available are falling, there are still some good deals available to consumers who regularly use their credit card when shopping and who are looking to earn cashback on their purchases.

(Post originally featured on MoneyFacts.co.uk)