Will your credit card rewards be scrapped following new EU rules on charges?

Providers are unhappy with new EU rules - but ultimately it is customers who will have to foot the bill

Some plastic may no longer compute for cardholders as perks are snatched away (Getty Images)

RBS has become the latest credit-card provider to axe lucrative perks for cardholders, sparking fears that reward and cashback credit cards could soon be history.

RBS has announced that it is scrapping the Your Points scheme from 1 July this year. Between RBS and NatWest, the scheme has about a million members who earn one point per £1 spent on their credit card. The points can be exchanged for shopping and travel vouchers.

However, RBS and NatWest will still offer its newer Cashback Plus credit and debit card scheme, which pays up to 1 per cent cashback at certain retailers.

The decision is hot on the heels of Capital One's: it has written to credit card customers informing them that it is either cutting cashback on their cards or axing it completely from 1 June.

Capital One has a number of cashback cards including the World MasterCard, Luma card and the Aspire World card. It is not openly saying which cards or customers will be affected – so if you have a Capital One card, look out for a letter that will outline your individual situation.

Both RBS and Capital One blame the decision on a new EU rule which caps "interchange fees". These fees are paid by retailers to card issuers when a debit or credit card is used as payment. The fee can be as high as 1.5 per cent for some transactions and the European Commission claims the charges are costing retailers across the eurozone €9bn (£6.5bn) a year.

The new rules, which are due to pass into law later this month, would cap interchange fees at 0.2 per cent for debit card and 0.3 per cent for credit card transactions.

But while the move will save retailers money, it will cost credit card providers and ultimately customers. RBS and Capital One aren't the only providers to have responded by cutting card perks – Avios and Nectar have cut rewards too – and they're unlikely to be the last.

Andrew Hagger, of Moneycomms.co.uk, says credit card providers will either have to absorb the cut in revenue from interchange fees or pass it on to the consumer via a variety of different methods.

"Over the past two years many card providers have increased their 'revert to' interest rates (when a 0 per cent promotional period ends) to around 18.9 per cent APR, but the new cap on interchange revenue could signal further rate increases for new and existing borrowers in the coming months," Mr Hagger says.

"The Capital One move to cut rewards may have caught some people by surprise but it's unlikely to be an isolated case. I'm sure we'll see some other card companies follow with similar moves."

As well as cutting reward benefits, watering down cashback offers or increasing interest rates, consumers could find the promotional 0 per cent purchase and balance transfer deals become less prominent. There is also the possibility that we'll see more cards introducing a monthly or annual fee. "The impact on standalone card providers [as opposed to the credit card arms of the banks] could be more pressing as they don't have the luxury of subsidising the revenue reduction by cross-selling a range of other profitable banking products," Mr Hagger says.

Credit-card firms are remaining tight-lipped about whether their reward and cashback schemes will continue to be offered when the EU cap takes effect.

A Santander spokesperson told The Independent: "Clearly the change in the way that interchange is now calculated impacts the economics of any card business and we will need to reflect on how to ensure we maintain the right balance going forward."

So what should you do to ensure that you don't lose out if your credit card company decides to respond to the changing EU rules by reducing the rewards it pays? Make sure you read any correspondence from your card company and be prepared to switch to a better deal if necessary.

Pick a card... how to make the most of your plastic

Cashback and reward cards can be lucrative for customers who use the cards in the right way: the golden rule is always pay off your balance in full each month, or any rewards you receive are likely to be dwarfed by the interest you pay.

For those who will suffer from their cashback or reward scheme changing, there are still a number of cards with perks on offer.

American Express could be a good bet for borrowers looking for a new cashback deal, as the EU cap will not apply to Amex for three years.

The American Express Platinum Everyday card offers an introductory cashback rate of 5 per cent for the first three months up to a maximum £100 (£2,000 of spending). After this, it pays 0.5 per cent on spending up to £3,500 a year; 1 per cent from there up to £7,500; and 1.25 per cent on everything after that.

Another option is the Santander 123 credit card, which pays 1 per cent cashback at major supermarkets, 2 per cent cashback at major department stores, and 3 per cent cashback at major petrol stations, and on National Rail and Transport for London travel (up to a spend of £300 a month).

Other options include Tesco Bank ClubCard, John Lewis Partnership, M&S, and MBNA, which all offer various rewards, or ASDA Money, which offers cashback.