On December 1st, MBNA Canada sold its credit card business to TD Bank Group for an undisclosed amount. Many MBNA customers are wondering what this transaction means for their account.
MBNA Canada is the fourth largest credit card issuer in Canada and the largest issuer of MasterCard’s. TD Bank’s combined Canadian credit card business will total about 5.8 million active accounts.
Toronto-based TD said it expects the combination to be completed in about 18 months. In the meantime, MBNA Canada will continue to operate on a stand-alone basis. Credit card companies typically bundle the balances their customers carry and sell them as investments.
MBNA Canada: Changes Coming?
According to one bank insider, this sale could mean that big incentives like the $60 rebate to sign up for the MBNA Smart Cash MasterCard will soon come to an end. Great rewards and fixed low APR credit cards from MBNA Canada will disappear within 18 months after the credit card division is completely absorbed into TD Canada Trust.
TD is already looking at raising interest rates of existing accounts and will stop offering rate teasers for new accounts. They’ve even set aside financial resources to cover losses for customers with higher credit limits than TD would have allowed.
MBNA Canada has always applied payments to balances with higher interest rates before lowest. TD works the opposite way, and has sent notices to MBNA customers that they will now have payments applied as per the TD credit card standards in order to take advantage of borrowers paying higher interest rates for a longer period of time.
Rewards Credit Cards in Canada
It will be interesting to see what actually transpires with this change to the rewards credit card landscape in Canada. We have always got the short end of the stick when it comes to rewards, especially compared to the juicy rewards that our neighbors to the south receive from their rewards cards.
With MBNA Canada sold to TD and Citibank sold to CIBC, we may be headed back the way of high interest rates with smaller rewards like we typically see from the big banks. There’s little to no U.S. competition to make our Canadian banks work harder for our business.
At least we still have Capital One here to keep everyone on their toes. The Capital One Aspire World MasterCard was recently rated the best travel rewards credit card in Canada.
We can only speculate what these changes will bring to consumers. Let’s hope all of these credit card companies, including MBNA Canada, continue to give smart spenders a chance to earn big rewards for a long time.
According to BMO’s Annual Holiday Spending Outlook, more Canadians than ever plan to redeem loyalty rewards for gifts this year.
“Canadians consider loyalty rewards a bona fide gift-giving currency,” said Su McVey, Vice President, Customer Communications & Marketing, BMO Bank of Montreal. “More than 85 per cent of respondents to our poll told us they do not think using rewards for gifts is tacky; in fact, the intention to use rewards as an alternative to cash or credit to purchase holiday gifts increased by 6 per cent to 20 per cent this year from 14 per cent in 2010.”
While credit cards (64 per cent), debit (57 per cent), and cash (56 per cent) remain the three top payment preferences, the practice of redeeming loyalty rewards as a fourth option suggests Canadians are looking for ways to stretch their purchasing dollars. The good news for retailers is that this growing thriftiness doesn’t come at the expense of in-store and online purchases.
“Canadians, who plan to spend $1,397 on average this holiday season, are being both frugal and generous, as 26 per cent of those polled told us they will use the savings they generate from redeeming their rewards to buy additional gifts,” said Ms. McVey.
LoyaltyOne, which along with BMO founded the Air Miles program in 1992, reported that redemptions in all of the Air Miles rewards categories spike during the holiday shopping season, but electronics and toys typically experience the largest increases.
Redeem loyalty rewards early to avoid disappointment
Canadians who plan to redeem loyalty rewards for gifts this year should take note. To ensure your gift(s) appear under the tree on December 25, you must place your order by December 14, the last day from which delivery of items ordered through the Air Miles catalogue will be guaranteed to arrive with Santa.
Top travel choices
There also is a spike in flight redemptions this time of year. The survey found 13 per cent of Canadians plan to use rewards for holiday travel. Sun destinations remain the most popular travel choice, according to LoyaltyOne. This year, the top five holiday destinations for Air Miles collectors are:
1. Mexico
2. Cuba
3. Dominican Republic
4. Jamaica
5. Bahamas
Reward collectors hoping to book flights or other travel for the holidays are advised to book well in advance of their travel dates.
Breakdown for use of loyalty rewards by region
- People in Ontario were the most likely to use rewards for gifts (25 per cent), while people in Quebec were the least likely (14 per cent).
- People in British Columbia were the least likely to say using rewards for gifts is “tacky” (7 per cent).
- People in the Atlantic Provinces were the most likely to put money saved from using rewards towards additional gifts (34 per cent).