Read the fine print. There's a £24 annual fee, fuel rewards are capped at £9/month, and you only get rewards at select stores which they have no doubt negotiated a promotional deal with.

Meanwhile UK interchange is no more than 1%.

Perfect example of what I'm talking about. Those figures are based on a certain model of reward utilization which is retarded by rules and limits. If that model changes and more people exploit the reward program, the program will change. The math has to add up.

The low interchange fee would appear to make these programs more viable in Europe, not less. The interchange fee is an operating cost that US banks cannot avoid. If they're giving me 1% back, and they're paying 1.65%, that's a net cost of 2.65% Take the same program in Europe, where transaction fees are < 1%, and the maximum cost to the bank is 2%; probably less.

The prevalence of these programs in the US would have to be attributed to some other factor(s). I'd posit that it is due to the American obsession with credit, and the intense pressure for growth in the US financial industry.

Interchange is the money the bank that issued the card gets from the merchant's bank. It's income, not expense, for that bank.

Ah, that makes sense. Thanks for the clarification.

Yes, I should have mentioned those rules.

The point I was trying to make was that we don't have as many rewards programs in Europe because we're behind curve, and they are starting to appear, not because of low interchange.

But those restrictions are significant and prove that low interchange is a big factor. It's why the only way to do it in Europe is with even more tricky rules and promotional deals, which limits its appeal.

For example, my Chase Sapphire card gives me 1% cash back everywhere and 2% on restaurants.. all of them. Whereas Santander only offers it at certain chain stores. That's because of interchange.

Santander 1-2-3 is quite a gimmick. Here's a list of participating retailers:

http://www.santander-products.co.uk/banking/calculator/cashb...

So, none of my water, fuel, energy, mortgage or communications providers qualify.

Under the hood it's a promotional scheme with certain big companies.