Cashback credit cards cut by Capital One following European Parliament legislation

Joe Hall
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Capital One says its cashback credit card rewards are "unsustainable". (Source: Getty)

Capital One is cutting its cashback reward offers to new customers of its credit cards.

The credit card producer described its reward system as "no longer sustainable" following the European Parliament's plans to introduce a cap on the amount of that card providers can charge on "interchange fees".

Card issuers will be limited to a 0.2 per cent and 0.3 per cent take from retailers' transaction under legislation expected to be introduced later this year. It is argued by the fees cost retailers up to €9bn (£6.5bn) across the Eurozone a year.

Capital One has told customers that it will be removing or reducing cashback on "unsustainable products" but did not specify details on the exact number of products or customers affected. Annual fees on cashback cards will be either scrapped or refunded to customers who have already paid.

In a statement the company said:

Following the European Parliament's resolution...the implications of significantly lower interchange revenue has also meant Capital One has had to review its cashback and rewards products for existing customers, several of which are no longer sustainable under current market conditions.

We will therefore, reluctantly, be removing or reducing the cashback on these unsustainable products. We are in the process of notifying all affected customers of the changes - and all will continue to earn cashback until June 1.

Critics of the European Parliament's plans argue they disproportionately affect the UK as British banks process more EU payments than any other eurozone country. A study from Europe Economics found that a cap on interchange fees could lead to a £1bn reduction in revenue to UK banks.

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