MBNA Canada has officially re-launched its True Line low interest rate credit card. Whereas it used to be a 9.99% fixed rate card, it now offers no annual fee and fixed rates from as low as 5.99% to as high as 14.99% depending on an applicants creditworthiness.
The new True Line card from MBNA joins both RBC and TD in offering Canadians risk based pricing, a strategy long employed in the United States, and more recently taking hold in Canada. Essentially, the way risk based pricing works, is that those with better credit profiles will receive lower rates and those with worse credit profiles will receive higher rates.
No longer will consumers who have pristine credit scores, subsidize the rates of those with lower scores. Likewise, those with lower credit scores should have a higher likelihood of getting approved, because the issuer will be able to price their risk appropriately. In the past, if the card offered a 9.99% apr, and an applicant had a higher risk profile, the issuer may have denied their application, because the interest margin they would made would not make up for the higher rate in losses they would have experience. Now higher risk customers can be priced with a higher apr of 12.99% or 14.99% at the outset, giving the issuer a better chance of realizing its required return, and thereby allowing it to approve the applicant.
What makes MBNA’s True Line card different from other low interest credit card products offered by RBC and TD, is that MBNA is allowing consumers to see which rate they will be eligible for prior to applying. MBNA will do a soft credit check with TransUnion, determine the applicants eligible APR and communicate it back to the applicant instantaneously. That soft credit check does not impact an applicants credit score, because it is considered a soft inquiry, not an application. At that point, the applicant can determine if they want to proceed with the full application or not.
With rates between 5.99% and 14.99% with no annual fee, and lines of credit as high as $100,000, it’s easy to see how MBNA Canada is trying to compete against unsecured lines of credit with the True Line card. The MBNA True Line card is counting on consumers finding it more convenient and secure to access a low rate line through a Mastercard than through their bank accounts.
For a full review of the True Line card and a comparison of its rates to those of others, click here.
To see which rate you’d be eligible for right away, click here.