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Q2 2013 GreedRates.ca Canadian Credit Card Landscape Report

The GreedyRates.ca Canadian Credit Card Landscape Report is conducted quarterly, using  data compiled from over 100 credit cards of the leading Canadian card issuers’ websites.

Key Findings:

 

  • Penalty interest rates are increasing for missed credit card payments: 

 

When consumers default on a credit card payment, it can result in their promotional and/or regular interest rate increasing to a penalty rate, which ranges from 2%-8% higher than the regular purchase interest rate. Despite the fact that only half of the cards surveyed have penalty rates, we are seeing more retail banks introducing and increasing their penalty rates to as high as 27.5%. In addition, we are seeing increasingly lower hurdles for penalty rates to be triggered.

  • Over 50% of credit cards have higher interest rates for cash advances than for purchases:

 

Many consumers are unaware that their interest rates are typically higher for cash advances than for purchases by 2-3 percentage points, and that interest on cash advances gets calculated at time of purchase, as opposed to the expiry of the grace period. We expect more cards to migrate to this model as rewards continue to take center stage and issuers try to capture additional revenues not seen as core to consumer value.

  • There are low interest rate credit card options for cardholders who carry a credit card balance: 

 

The average interest rate for low interest cards is 12.2% compared to 19.7% for all other cards. There are several stand-alone low interest credit cards as low as 9.9% with no annual fee. However, most of the retail banks offer low-rate options – for an annual fee ranging from $20-$50 – to get a low interest of 11.25% to 12.9%.

  • Not a lot of published 0% introductory interest rate offers for balance transfers, purchases or cash advances:

 

There was only one published 0% balance transfer offer, for a promotional period of 12 months. Of the cards surveyed, only three had published low introductory purchase rate offers.

  • Canadian cardholders have few options for low foreign exchange fees: 

 

Foreign exchange fees, applied to purchases made in a currency other than the Canadian dollar, range from 2% to 2.55% for most cards issued Canada, there are one or two notable exceptions.

  • Majority of credit cards offer a 21 day interest free grace period:

 

Except for one issuer who offered a 25 day interest free grace period, and Quebec issuers who offered 26 day grace periods, all others offered a 21 day grace period.

  • Close to 50% of credit cards with an annual fee did not charge a supplementary card fee:

 

Supplementary card fees are those fees issuers charge consumers to get another credit card on the same account. Historically, those cards with the highest annual fees, and the most consumer benefits such as trip cancellation and out of country medical insurance, required consumer to pay a supplementary card if another family member received a card on the same account. There are now several premium cards offering the supplementary card for free.

  • 35% of rewards cards surveyed offered a Welcome Bonus to sign-up for the card:

 

As competition for new accounts increases in the Canadian marketplace, issuers are offering more incentives to open and activate new accounts with them. We expect this competition to increase in the coming quarters as issuers try to take advantage of the turbulence caused by Aeroplan possibly moving from CIBC to TD. We expect the competition to benefit cardholders in the form of more welcome bonuses, richer welcome bonus offers, retention offers and annual fee waivers.

  • Most travel rewards cards with an annual fee of $99 or more, offered the equivalent of a return short-haul flight as a Welcome Bonus: 

 

Most cards with a $99 annual fee or higher, offered a return short haul flight (taxes & fees not included) as an incentive to apply and activate for their premium travel card offers. Some of the premium cards.

  • Retail banks are expanding their cash-back credit card offering: 

 

Cash back credit cards were traditionally seen as popular for lower spend cardholders who either didn’t qualify for premium credit cards, or didn’t spend enough to earn a flight in a reasonable amount of time. We are now seeing banks creating cash back value propositions targeted to premium cardholders with more cash-back per dollar spent, fewer spending caps, and welcome sign-up bonuses.

 

Credit Card Type Annual Fee  FX Fee Over Limit Fee Cash Advance Fee
Basic  $29.0 2.5%  $27.0 1.00%
Student  none 2.4%  $19.6 none
Cash-Back  $76.6 2.5%  $25.0 1.00%
Low Interest  $47.9 2.3%  $18.3 0.71%
Retail  $39.0 2.0%  $20.6 1.00%
General Rewards  $79.5 2.3%  $14.9 0.50%
Travel Rewards  $98.3 2.4%  $23.0 0.88%
All cards  $80.2 2.3%  $21.0 0.80%

 

Credit Card Type Annual    APR Penalty    APR
Basic 18.66% 21.16%
Student 19.88% 21.02%
Cash-Back  19.84% 22.74%
Low Interest 12.19% 16.29%
Retail 20.15% 22.55%
General Rewards 19.84% 21.66%
Travel Rewards 19.90% 22.40%
All cards 18.72% 21.31%

 

Credit Card Type Balance Transfer Intro Rate Cash Advance Intro Rate
Basic N/A N/A
Student 3.90% 3.90%
Cash-Back 0.99% 1.49%
Low Interest 3.81% 2.49%
Retail 0.97% N/A
General Rewards 3.90% 3.90%
Travel Rewards 2.60% 3.90%
All cards 2.66% 3.14%

 

The GreedyRates.ca Canadian Credit Card Landscape Report is conducted quarterly, using offer data from the leading Canadian card issuers’ websites. Introductory offer periods and regular interest rates can vary with applicants’ credit quality and issuer risk-based pricing policies. For questions or more information regarding this report, please contact our Media Department at [email protected] .

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