The credit card market in the UK is mature, large, strictly regulated and highly competitive. An estimated 31 million consumers hold at least one of these cards, using them as a source of payment, a convenient form of short-term borrowing or both.

Reflecting improvements in the wider economy, the market is once again performing strongly. In 2014, the volume of credit card payments transacted through UK merchants increased by 10%, while gross credit card lending grew by 6% and net lending by 13%. Along with increased customer usage and lower impairment levels, credit card issuers are continuing to benefit from healthy interest margins. Yet although interest generates the most revenue for card issuers, another important source of income is under threat.

Income earned from charging interchange fees (to merchant acquirers when a cardholder makes a payment) typically goes towards funding the (often free) rewards that come with many credit cards, such as cashback and loyalty points. The imminent introduction of a cap on these fees has prompted providers to reassess whether they can still afford to offer these rewards, at least at the current level. Already, one notable card issuer has chosen to withdraw its cashback offer, and other card issuers could follow suit over the coming months.

Mintel’s consumer analysis investigates how cardholders may react to such a move. The results of the online survey additionally provide insight into plastic card ownership, levels of credit card debt and recent cardholder activity. This complements the market information and brand research that is also included in the report.

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