Honey, I shrunk the UK airmiles credit card market
Recent EU laws relating to credit cards have all but destroyed the UK travel hacking market. For those unfamiliar with the term, this is the ability to earn airmiles from UK credit cards. The UK airmiles credit card market has shrunk from a whopping twenty cards to nine measly options in recent months. Admittedly this makes it easier for you to select your UK airmiles credit card, but what this means for the future of credit cards offering airline rewards in the UK remains to be seen.
EU Cap on interchange fees
The EU cap on interchange fees, introduced in December 2015, limits the amount that credit card companies can charge. The limits are:
- 0.3% for domestic credit card transactions
- 0.2% for domestic debit transactions
What does this mean?
At the time of implementation, Gov.uk forecast that British business could save up to £480 million a year on almost 10.7 billion credit and debit transactions. George Osborne claimed it would mean lower prices for consumers. The whole basis of the legislation was supposed to be more transparency, lower prices and increased card payments. In theory then this should be good news.
But as with any legislation, there are winners and losers.
18 months on and merchants have clearly benefitted from the reduction in costs.
The European Payments Council recognises however that credit card issuers have suffered losing a potential €2bn in revenues. This, of course, has been passed on to the consumer with many reducing rewards, introducing or increasing card fees., or withdrawing from the market completely.
The Uk is the largest credit card market in the EU, and companies such as M & S and Tesco have been slashing rewards for their customers.
In addition, the withdrawal of all MBNA airline credit card options in the UK really limits the choice for those in the UK wishing to use credit cards to travel hack.
Furthermore, the European Payments Council stated in summer 2017 that ‘consumers are yet to see any reduction in the costs of goods and services directly attributable to the regulations’.
For travel hackers?
There are still options available for you to boost your airmile balance, but these are now seriously limited and almost all of them come with a charge. With less competition in this space, we may see further reductions in accrual rates or more withdrawals. My message is simple – make hay while the sun still shines as sign up bonuses such as the 26,000 AVIOS from the British Airways Premium Plus Card or 22,000 from AMEX Gold may soon be a thing of the past! Now that really will compromise my ability to fly business for less than economy.
What do you think?
Do you have a view on these legislative changes and what they might mean for you? Have your say in the comments below.