The Good, the Bad and the Ugly of Canadian Credit Cards in 2017
Bold entrances into town, crestfallen departures, and a family feud that shook us to our core.
It may sound like we’re summarizing a Clint Eastwood flick, but we’re merely covering the dramatic ups and downs of Canadian credit cards in the past year. Though growing, our credit card market is far smaller than that of our southern neighbors, so what might have flown under the radar in the States—new products, new features, and lucrative promotions—became bonafide water cooler talk in Canada.
Hold on to your proverbial horses while we take you back through the good, the bad, and the ugly of your credit cards in 2017. Because really: should anything be more engaging to you than your money and how you use it?
Two buzzworthy cards entered the market, while the decision to improve an already-solid travel rewards program was a huge win for consumers. We’ll nod to the ‘glass half-full’ types and start by reviewing the stuff to get excited about.
Amex Cobalt introduced
Without a doubt, the introduction of the American Express Cobalt card was the best credit card news of the year. This exclusively Canadian card lets cardholders earn 5 points on restaurants, bars, grocery stores and food delivery; 2 points on transit & gas; and 1 point on all other purchases for every $1 spent in Canada. This card was quite clearly aimed at Millennials, even offering a monthly rather than annual fee, which made it feel more like a subscription service instead of a traditional credit card.
American Express Membership Rewards points can be transferred to Starwood Preferred Guest (SPG) at a 2:1 ratio, which can be incredibly valuable when you’re spending on those 5-point categories. It’s also worth noting that AMEX has dropped its minimum income requirement on all its cards, which is a sign that it’s trying to appeal to a broader audience.
Home Trust introduces a no annual fee, no foreign transaction fee card
Home Trust is known primarily as a mortgage lender, but they’re making a welcome push to disrupt the Canadian credit card market. In 2017 they introduced the Home Trust Preferred Visa, which on first glance seemed like a rather “meh” offering: no annual fee and 1% cash back. But credit card sleuths found a benefit hidden in the fine print which made it really stand out among travel cards in Canada – no foreign currency conversion surcharges.
Word spread about the feature, and this essentially became the perfect plastic companion for those who missed out on signing up for the now-defunct Amazon.ca Visa (read below to find out about that card’s unfortunate demise). Oddly enough, the Preferred Visa’s lack of foreign trans. fees was not well promoted by Home Trust initially, though as more and more Canadians sign up for the card, they now advertise the rare travel perk front and center.
And the feature can be useful within Canadian borders as well. I caught up with Jim Kozack, Vice President of Credit Cards at Home Trust, who told me, “we obviously felt that eliminating currency conversion fees would be especially popular with those that travel frequently, but we’re also seeing more online shoppers using the Home Trust Preferred Visa as a way to purchase items from foreign vendors and for goods priced in foreign currencies.”
Jim also stressed to me that, although the card has clear travel perks (aside from the lack of foreign trans. fees it also offers free rental car insurance and emergency card and cash replacement), its 1% flat cash back and no annual fee make it more than just a one-trick pony.
We’re excited to hear that Home Trust is making a push in the Canadian credit card landscape, and hopefully this will lead to more gap-filling credit cards in 2017.
WestJet improves its rewards program
Canadians are sadly accustomed to hearing about rewards programs being devalued, so it came as a complete shock when WestJet announced that they were making positive changes to their WestJet Rewards program. Not only did they reduce the amount of spend required to earn Silver and Gold Status, they also lowered the redemption requirement for Member Exclusive award travel on WestJet & Delta Airlines. With these changes, you can now fly to Europe for under 300 WestJet dollars one way, or under 600 round trip. Don’t forget that the WestJet RBC World Elite Mastercard comes with a $250 WestJet dollars signup bonus which is almost enough for a one way flight to Europe!
Air Canada lets go of Aeroplan
Most would categorize Air Canada’s divorce from Aeroplan under negative news, but I can’t really co-sign on that. Over the last decade, the high number of Aeroplan points required to make a redemption, and the limited flights available, led many Canadians to become increasingly disappointed by and critical of the marriage.
The split frees up Air Canada to create a better, more competitive loyalty program that will get Canadian frequent flyers excited again. If you’ve been collecting Aeroplan points for a while, don’t worry, you can continue to use your points to book free flights on Air Canada and their partners until 2020. Even if you don’t use all your points by then, Aimia will likely have secured seats with other airlines by then, which you could then claim.
Scotiabank introduces travel rewards for debit card users
Although this isn’t related to credit cards per se, it’s worth mentioning that Scotiabank introduced the Passport Debit Card to the public, which is the only debit card that allows you to earn travel rewards. You’re technically earning Scotia Rewards points which allows you to redeem for other things besides travel including merchandise and gift cards. Using a Scotiabank credit card would earn you points much faster, but the Passport Debit Card is a good alternative for those who prefer to use the “cash” that they have and want to earn points at the same time.
New cash-back cards from TD
In a somewhat surprising move, TD released a few new cash back cards into the market. The most noteworthy was the TD Cash Back Visa Infinite, whose most impressive feature is a promotional 6% cash back rate on all spend (only available if you apply through the GreedyRates link, otherwise the 6% is for gas, groceries and recurring bills) for the first three months. There is however a cap on the 6% of $3,500 in spending, which works out to be maximum cash back return of $210. After the promotional period ends, you’ll earn 3% on those bonus categories and 1% on everything else. The annual fee of $120 does get waived for the first year, but after that its perks are comparable to other cash back cards like the SimplyCash Preferred Card from American Express or the MBNA Rewards World Elite Mastercard. I’ve included this as positive news because the 6% really is quite generous.
Despite these positive developments, the year wasn’t without its rough patches. Three popular credit cards were discontinued, while two of the best credit cards on the market were devalued substantially.
CHASE pulls out of Canada
Yes folks, Chase Canada bought the farm. Cardholders of the Amazon.ca Rewards Visa and the Marriott Rewards Premier Visa Card were grandfathered in, but new applicants are no longer being accepted. This was pretty significant news since both of the cards had no foreign transaction fees, which meant cardholders saved 2.5% whenever they made a purchase in a foreign currency. The Amazon card also had no annual fee, which made it arguably the most popular card with no foreign transaction fees in Canada. I’m sure both Amazon and Marriott will announce new cards for the Canadian market in the future, but currently there’s a void for Canadians that are super-loyal to those brands.
BMO devalues the World Elite Mastercard
The imminent changes to the BMO World Elite Mastercard, which take effect on January 15th 2018, led many a GreedyRates reader to voice their displeasure. What was once a very popular 2% return travel rewards card has turned into something much more complicated. Cardholders’ real return is now 1.43% – 2.14%, which isn’t bad, but the changes are still disappointing for consumers. We detailed the changes here if you want to learn more.
We expect that BMO’s customer service department has been dealing with an avalanche of angry, all-caps emails, which will likely continue to pile up.
Capital One discontinues one of its most popular cards
The Aspire Travel World Elite Mastercard had already been devalued once before a few years back, and it was a bit of a shock when Capital One decided to eliminate it from their offerings entirely. According to Capital One, the change in interchange rates back in 2015 affected the performance of the card over the last few years. As a result, the card was no longer profitable for them, so they took it out to pasture. On a positive note, all current cardholders can continue to use their cards for the foreseeable future as they have been grandfathered in.
Though the Tangerine Money-Back credit card is still one of the better cash back credit cards on the market, there’s no denying that the changes announced in 2017 were a disappointment. Though cash back earned on cardholders’ 2-3 selected purchase categories still earn 2% cash back, the cash back earned in all other categories was reduced from 1% to 0.5%. In addition, Tangerine increased the foreign transaction fee from 1.5% to the standard 2.5%. This was a hard pill to swallow for cardholders. The card had been introduced to the market just 13 months prior to the devaluations, leading many cardholders to feel like victims of a bait and switch scheme. Tangerine has a reputation for innovative products, but this credit card downgrade was a faux pas
All things considered, 2017 was something of a downer for Canadian credit cards. It’s understandable that credit card companies need to make a profit, and that offering exorbitant cash back and rewards can chip into that. But the public backlash to some of these changes has been loud and clear, and it’s hard to imagine that the changes will benefit the issuers long term.
Offering truly lucrative credit card benefits might make a temporary dent into a card issuer’s bottom line, but can also engender an enormous amount of respect and brand loyalty from consumers, as well as make cardholders more likely to try other financial products offered by the same issuer. Amex is likely taking a temporary hit to profits by offering a card with such a strong rewards structure, but the buzz that it’s generated will likely outweigh that hit.
May other card issuers take note.