Santander has put a limit on the cashback amount from its 123 credit card. The maximum it will now pay is £9 per month.
They are also increasing their interest rates on purchases from 12.7% to 15.9%. This means that unless borrowers pay back their entire balance each month, lending is going to become more expensive.
This is not the first time Santander’s 123 customers have been hit with a price increase. In 2016, their monthly fee went from £2 a month to £5 a month! In November of the same year, balances of £20,000 or more had an interest rate cut of 1.5%.
So why have Santander decided to make these changes? Previously 123 credit card customers were able to earn cashback from department stores at a rate of 2%, from supermarkets at 1%, and 3% on travel expenses up to £300 per month. Both department stores and supermarkets provided cashback on unlimited spends.
There is now a limit on the amount you can spend for cashback earnings. At department stores it has been restricted to £100 at supermarkets, £150 at department stores, and £100 on travel.
Customers are going to have to decide whether it is worth keeping the card as the main reason why people opened the accounts in the first place was because of the cashback. Since they can now only earn a maximum of £9 a month, and on top of that pay a £3 a month monthly fee, what is the incentive to keep the card?
New customers who signed up after September 15 have already been lambasted with the charges, and current customers will experience the changes after February 1.
Santander have said that the cashback slash is due to EU interchange fee changes, which were brought in last year to place a restriction on the amount that card companies are charging retailers for transactions.