Millions of Tesco credit card users face a huge drop in the number points they collect when spending, with some set to see their benefits culled to just a quarter of their current value.
The supermarket will slash the number of Clubcard points customers with its Clubcard credit card and World credit card earn on non-Tesco purchases later this year. See our Credit Card Rewards guide for the best buys.
Tesco blames an EU cap on so-called 'interchange fees' that card firms charge retailers, to be introduced later this year.
Both Capital One and RBS made similar cuts to their rewards schemes earlier this year for the same reason, effectively passing on their losses to consumers, something MoneySavingExpert.com predicted would result from the new rules.
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Revealed: Tesco credit card points cut
- Tesco Clubcard credit card users: From 1 December, all customers will accrue one point per £8 spent on non-Tesco spending, compared to one point per £4 now. So a £100 transaction will get you 12.5 points compared to 25 now.
- Tesco World credit card users (Visa or Platinum): From 1 November, existing customers (they're no longer on sale to new customers) will see the points they earn on non-Tesco spends slashed from one point per £2 spent, to one point per £8. A £100 transaction will get you 12.5 points compared to 50 now.
Points earned on Tesco purchases won't change. Clubcard credit card users get one point (five, once you factor in regular Clubcard points) for every £4 spent. World credit card users get one per £2 spent (three, if you factor in regular Clubcard points)
In total, 2.8 million customers are hit. Tesco says no other terms and conditions are changing, and you can continue to use your card and redeem loyalty points in the same way.
Q&A on what's happening to card reward schemes
What are interchange fees and why do they affect cashback cards?
'Interchange fees', as they are known in the industry, typically add around 8p per transaction for debit card payments and around 0.8% of the transaction for credit card payments.
In March, MEPs voted in favour of bringing in a cap of 0.2% of the value of the transaction on debit cards and 0.3% of the value of the transaction for credit cards. This will take force on 9 December 2015. See the EU agrees card charges shake-up MSE News story for more on this.
MoneySavingExpert.com has previously raised concerns a cap would lead to card rewards and 0% deals being scrapped. It's also unlikely retailers will pass on any gains to shoppers.
We're awaiting the results of a Treasury consultation to see how exactly the rules will be translated into UK law.
Will other providers ditch cashback and reward cards?
Here's what the other major credit card reward providers told us when we asked today if they have plans to cut their cashback or rewards offerings:
- Amex says it has no plans to change its range, although unlike other card providers, for the first three years, the EU's cap will not apply to Amex or Diners Club issued cards. If however it's issued by another bank but with either of those logos, then those cards are hit by the cap. So a Barclaycard with an Amex symbol is affected.
- Aqua says it has no plans at present to change its cashback offering.
- Asda says it has no plans at present to change its cashback offerings.
- Barclaycard says it "has no plans to change the value our customers receive from the Freedom Rewards card at this time".
- Halifax says it "regularly reviews" its credits cards "to ensure they suit the different needs of our customers and that they remain competitive". But adds that it continues to offer rewards cards.
- HSBC says it "regularly reviews products in light of market changes".
- Lloyds Bank says it "regularly reviews" its credits cards "to ensure they suit the different needs of our customers and that they remain competitive". But adds that it continues to offer rewards cards.
- MBNA says it's waiting to see how the UK implements the cap before it makes any changes.
- Santander says it needs to "reflect" on how to ensure it maintains the "right balance" going forward as a result of the forthcoming change to interchange fees. It adds that it regularly reviews all its products.