Capital One Canada has discontinued its Aspire Travel World MasterCard, previously one of the richest travel rewards cards in the Canadian Marketplace. Capital One Canada has recently sent out letters to cardholders indicating that existing cardholders will continue to receive the same rewards rate and anniversary bonuses as they enjoy today.
Capital One Canada has replaced the Aspire Travel World MasterCard with the Aspire Travel World Elite MasterCard. For new cardholders, the new World Elite MasterCard offers a much smaller sign-up bonus, of only $100, compared to $350 for the old card, and no longer offers an anniversary bonus of $100 per year. Moreover, by replacing the World card with a World Elite card, cardholders will now have to either have a personal income of $70,000 or household income of $120,000.
After Visa and MasterCard voluntarily committed to reduce their interchange rates to an average of 1.5% in November for 5 years, it was widely believed that credit card rewards programs, which rely on interchange to fund their rewards, would need to be weakened by the banks to maintain profitability. Capital One Canada’s dramatic weakening of the Aspire Travel value proposition can be seen in that context. If so, it will be interesting to see which other credit cards will follow suit. Aimia, the parent company of Aeroplan, lost 18.5% of its stock value after the November announcement by Visa and MasterCard.
However, the de-valuing can also be seen in the context of Capital One Canada’s recent signing of the Costco Canada deal. Many have observed that the Aspire Travel World MasterCard offered more value at Costco for Costco members, than the Capital One Costco MasterCard itself, even with the annual fee difference. That was, in large part, a result of the fact that the annual fee of $120 was off-set by the $100 anniversary bonus and the $350 sign-up bonus of the old Aspire card. Regardless, Capital One will still face competition within Costco from high earning stallwarts such as the BMO World Elite Mastercard, which gives 2% back on spend at Costco now as well.
To add further strain to Capital One, while the Aspire World MasterCard offered a 2% earn rate, many assume that issuers are collecting less than 1% interchange at Costco, further exacerbating Capital One Canada’s problems (and other MasterCard issuers as well). In effect, they were losing more than 1% for every Aspire Travel World MasterCard dollar spent at Costco.
For Canadians, it may be a sign of a potential de-valuing of credit card rewards programs or it may just be an isolated Capital One issue. If the former, Canadians should take advantage of as many of the sizeable welcome bonus credit card offers in the marketplace today as they can.