Chase 1% Cashback - will they renew it? (Spoiler...they have) 19 August 2022 at 10:25AM edited 25 August 2022 at 12:53PM in Budgeting & bank accounts 62 replies 7.5K views

tomla

Predictions please, for the UK Chase current account, do you think the 1% cashback will be renewed after the first year of having the account?

I think that there is a chance because the app is set up to have a rewards balance total on the homepage and without the rewards total (where the round up 5% is also listed) it would always show £0, unless they release another Amazon 3% style promo.

The round-up account balance gets reset to £0 at 1 year but it also then renews at 5% again. So I think they might continue it - especially if active users fall away once it finishes. Not sure awareness in the UK market is at the level they might have hoped for yet.

Spies

No it wont be renewed as it was an incentive to get people to join, but interest rates might be above 1% by then anyway.

Daliah

Doubt it very much.

The_Fat_Controller

I bet the have been haemorrhaging money from their savings accounts now that other banks are paying up to 1.9% on instant access, therefore I think it is very unlikely they will renew their cashback offer.

Maple08

Cashback is generally passed onto us because the banks charge a fee (interchange fee) every time you use your card. Whatever fee that they take, they pass it onto us and keep some of it. For Chase, they're having to pay us to use their card because they cannot gain enough money from the fees alone. 

For example, the interchange fee for debit cards are 0.2% but for credit cards, it's 0.3%. You can confirm it from Mastercard's own website but this is what I'm assuming. This is the same reason why I think the cashback rates for other credit cards are 0.25%, as the banks can keep 0.05% and pass the rest onto us. 

So, for this reason alone, I don't think they're going to keep it going as it doesn't make much financial sense, unless they need to keep people. They said they'll breakeven and start making a profit after 2027/2028, so maybe they'll extend cashback, maybe not. 

Speedbird676

The_Fat_Controller said:

I bet the have been haemorrhaging money from their savings accounts now that other banks are paying up to 1.9% on instant access, therefore I think it is very unlikely they will renew their cashback offer.

Mine just finished haemorrhaging today.

WillPS

Maple08 said:

Cashback is generally passed onto us because the banks charge a fee (interchange fee) every time you use your card. Whatever fee that they take, they pass it onto us and keep some of it. For Chase, they're having to pay us to use their card because they cannot gain enough money from the fees alone. 

For example, the interchange fee for debit cards are 0.2% but for credit cards, it's 0.3%. You can confirm it from Mastercard's own website but this is what I'm assuming. This is the same reason why I think the cashback rates for other credit cards are 0.25%, as the banks can keep 0.05% and pass the rest onto us. 

So, for this reason alone, I don't think they're going to keep it going as it doesn't make much financial sense, unless they need to keep people. They said they'll breakeven and start making a profit after 2027/2028, so maybe they'll extend cashback, maybe not. 

0.2% (and 0.3% for credit) is the maximum Mastercard can charge on interchange. They do not give 100% of that interchange revenue to the card issuer, otherwise they wouldn't make any money themselves. Even if they did, Chase would still have to directly fund cashback equivalent to 0.8%.

Marchitiello

WillPS said:

Maple08 said:

Cashback is generally passed onto us because the banks charge a fee (interchange fee) every time you use your card. Whatever fee that they take, they pass it onto us and keep some of it. For Chase, they're having to pay us to use their card because they cannot gain enough money from the fees alone. 

For example, the interchange fee for debit cards are 0.2% but for credit cards, it's 0.3%. You can confirm it from Mastercard's own website but this is what I'm assuming. This is the same reason why I think the cashback rates for other credit cards are 0.25%, as the banks can keep 0.05% and pass the rest onto us. 

So, for this reason alone, I don't think they're going to keep it going as it doesn't make much financial sense, unless they need to keep people. They said they'll breakeven and start making a profit after 2027/2028, so maybe they'll extend cashback, maybe not. 

0.2% (and 0.3% for credit) is the maximum Mastercard can charge on interchange. They do not give 100% of that interchange revenue to the card issuer, otherwise they wouldn't make any money themselves. Even if they did, Chase would still have to directly fund cashback equivalent to 0.8%.

I think they also aim to make a bit more money with ex-EU spending, hence having the card on the World Elite set up, which gain them extra fee outside of the EU.

Maple08

WillPS said:

Even if they did, Chase would still have to directly fund cashback equivalent to 0.8%.

That's what I'm saying, there's no way it's sustainable if Chase is having to pay 0.8% for this promotion. 

tomla

Maple08 said:

Cashback is generally passed onto us because the banks charge a fee (interchange fee) every time you use your card. Whatever fee that they take, they pass it onto us and keep some of it. For Chase, they're having to pay us to use their card because they cannot gain enough money from the fees alone. 

For example, the interchange fee for debit cards are 0.2% but for credit cards, it's 0.3%. You can confirm it from Mastercard's own website but this is what I'm assuming. This is the same reason why I think the cashback rates for other credit cards are 0.25%, as the banks can keep 0.05% and pass the rest onto us. 

So, for this reason alone, I don't think they're going to keep it going as it doesn't make much financial sense, unless they need to keep people. They said they'll breakeven and start making a profit after 2027/2028, so maybe they'll extend cashback, maybe not. 

I would have expected cashback to be coming out of the merchant fee which is a larger % than the cashback being offered on each purchase.

In any event cashback is a marketing cost for Chase. They might not be finished marketing to us to convince us to actually move our current account busines to them...which I'm guessing the early bunch won't have done because direct debits couldn't be moved across at inception.

WillPS

tomla said:

Maple08 said:

Cashback is generally passed onto us because the banks charge a fee (interchange fee) every time you use your card. Whatever fee that they take, they pass it onto us and keep some of it. For Chase, they're having to pay us to use their card because they cannot gain enough money from the fees alone. 

For example, the interchange fee for debit cards are 0.2% but for credit cards, it's 0.3%. You can confirm it from Mastercard's own website but this is what I'm assuming. This is the same reason why I think the cashback rates for other credit cards are 0.25%, as the banks can keep 0.05% and pass the rest onto us. 

So, for this reason alone, I don't think they're going to keep it going as it doesn't make much financial sense, unless they need to keep people. They said they'll breakeven and start making a profit after 2027/2028, so maybe they'll extend cashback, maybe not. 

I would have expected cashback to be coming out of the merchant fee which is a larger % than the cashback being offered on each purchase.

Regardless of the fees merchants pay, only a maximum of 0.2% of domestic txn value goes to Mastercard, this is the Interchange Fee. From this, Mastercard will cut Chase a commission.

Chase wont see any of the rest of it, those will go to the acquiring bank.