Halifax drops £5-a-month credit card reward, blaming EU rules

Halifax has joined the spate of providers slashing card rewards and blaming the EU “interchange fee” cap for the decision.

Consumers have already been hit with a string of axed or reduced credit card rewards since the introduction of a new EU regulation in December that caps debit and credit card processing fees.

Now Halifax has dropped the £5 per month it pays to Clarity cardholders who also have a current account and who meet certain other conditions.

Halifax has sent out letters to the first wave of customers who hold the Clarity credit card.

The card currently pays a £5 reward each month to users who spend £300 per month and who also have a current account (where they must pay in £1,000 or more each month).

The perk is now being “phased out” although new customers can still apply for the Clarity credit card before August 9.

Those who have already received letters, or who will do in the coming days, will not be able to earn the £5 monthly reward after September 30. Final rewards will be shown in the October statement.

The second wave of customers, including those who apply before the August 9 deadline, will be contacted in due course with the reward ends.

Halifax said it regularly reviews its products to make sure they remain "competitive, sustainable and relevant to customer needs" and the interchange fee was one factor that played a part in this decision.

A spokesman said: “Despite the removal of the reward payment we remain confident that the Halifax Clarity credit card offers great value for customers, with no foreign exchange, balance transfer or cash withdrawal fees.

"Customers can also earn rewards through Cashback Extras which offers up to 15pc cashback with participating retailers.”

What are interchange fees?

"Interchange fees" are part of the Merchant Service Fees paid by retailers to their bank to process card transactions.  The charges are centrally set by card schemes such as Mastercard and Visa.

Before the new rules, retailers paid an 0.8pc per credit card transaction (which could go up to 1.5pc) and 9p for debit cards. This can then be used to fund reward schemes offered by financial institutions. 

Now, the fees are capped at 0.2pc for debit cards and 0.3pc for credit cards fees at 0.3pc. The UK Cards Association estimates the limited charge means UK banks will lose £750m per year from card transactions, hence the cuts to rewards.

Halifax is the latest provider to cut perks

Capital One was the first credit card provider to cut its rewards last summer. It said the cap meant its deals were "no longer sustainable". 

It was quickly followed by Natwest/RBS who stopped the YourPoints scheme a month later.

Last November, Tesco announced it would be halving the Clubcard points that could be earned. Sainsbury’s also cut the number of Nectar points customers could collect in February this year.

Santander also increased the annual fee on its 123 credit card at the start of the year. Customers now pay £3 a month – an extra £12 a year for no extra reward.

Rachel Springall, from financial advice site Moneyfacts, suggested cuts to rewards may "still be on the table".

She said: "If one firm makes cuts, others may follow.

"Providers need to make sure they are offering customers good deals, but they also need to make sure they can afford it."

Are there any deals left?

American Express’s Platinum Cashback Everyday credit card offers 5pc on purchases of up to £2,000 for the first three months. After this, you’ll earn 0.5pc on annual spend of £3,000, 1pc on £3,500 to £7,500 and 1.25pc on purchases above £7,001.

Amex also offers another Platinum Cashback card that also pays 5pc on purchases up to £2,500 for the first three months. Customers then earn a flat rate of 1.25pc cashback on everyday spend. A £25 annual fee applies which will impact the cashback.

Those who frequent supermarkets could benefit from their reward cards. 

Sainsbury’s Nectar purchase card will give new customers who apply for the card before September 27 5,000 bonus points if they spend £800 in store in the first three months. Two Nectar points are earned for every £1 spent in store. For every £5 spent elsewhere, shoppers will earn one point.

Tesco credit card holders can earn one Clubcard point for every £4 spent in Tesco or £8 spent elsewhere. Marks and Spencer’s credit card also offers a point for every £1 spent in store.

Have a question for our experts? Email moneyexpert@Finance.co.uk. The best of the answers are included in our weekly newsletter