Visa and MasterCard Canada agreed this week to take a haircut on how much the credit card networks charge retailers in transaction fees.
The agreement was “voluntary” a statement from the federal Department of Finance said, but only just so – government officials had been warning the two card giants for more than a year so-called interchange fees need to be reduced.
If the card networks didn’t do it themselves, Ottawa would have for them.
MORE: Visa, MasterCard Canada agree to slash swipe fees
The new deal, which will lower interchange fees by 10 per cent and freeze them for five years, means that by April, retailers from big-box chains to small mom-and-pop convenience stores across Canada should begin collectively saving hundreds of millions paid to Visa and MasterCard as well as the banks who offer those cards to customers.
The upshot, Ottawa hopes, is that retailers pass on those savings.
Hit to rewards?
But one potential downside to the decision is that those plush loyalty programs many credit cards are now tied to, like RBC’s Avion program, BMO’s World Elite card or Aventura cards at CIBC, could see their perks cut.
That’s because a portion of those high interchange fees goes to funding those “premium” cards.
“It is possible that this could translate to them altering their current rewards, to make up for the losses,” said Penelope Graham, editor at credit card program tracking site ratesupermarket.ca.
RBC said in a statement this week the bank’s Avion program will “endeavor to ensure benefits are preserved,” a spokesperson said, “to the extent possible.”
Here’s a look at some of the rewards those interchange fees are currently supporting. Check back in April to see whether they’ve been scaled back.
Travel
BMO Rewards World Elite MasterCard
Provides two points for every dollar spent, or a two per cent return – or half a percentage point more than a lot of other travel cards. Flights start at 10,000 points. Annual fee $150.
Capital One Aspire Travel World MasterCard
Provides two reward miles for every $1 spent on all purchases. 35,000 bonus miles for first purchase. Flights start at 15,000 miles. Incudes travel insurance. Annual fee $120.
TD First Class Travel Visa Infinite Card
Provides three “TD points” for every $1 purchased and triple that when used through TD’s travel centre. 10,000 gets you $50 redeemable in travel cash. Annual fee $120.
CIBC Aventura Visa Infinite Card
Provides one point for $1 in purchases, or 1.5 in grocery, gas and drugstore purchases. One point equals one Aeroplan mile, while 5,000 points equals $50. Annual fee $120.
Gas
Scotia Momentum Visa Infinite
Provides 4% cash back on gas, i.e., $4 for every $100 spent at the pump. Annual fee $99.
CIBC Aerogold Visa Infinite
Like the Aventura card, this provides 1.5 points on gas purchases, or 4.2 per cent back. The catch is, the credit comes in Aeroplan miles, not cash. Annual fee $120.
Canadian Tire Gas Advantage MasterCard
Provides 10 cents off per litre at Canadian Tire gas stations. Must spend $2,000/month on the card to get max discount though, and there’s no other rewards. No annual fee.
Petro Points CIBC MasterCard
Provides a straight 2¢/L discount on fuel purchased at Petro Canada stations. You also earn petro points on your everyday purchases.
Cash back
Scotia Momentum Visa Infinite
Provides four per cent back on grocery, gas sales, two per cent on drugstore sales, one per cent on everything else. Annual fee $99.
MBNA Smart Cash MasterCard (TD)
Provides two “points” per dollar spent on gas, grocery, one all other purchases. Five thousand points amounts to a $50 cheque, mailed automatically. No annual fee.
Capital One Aspire Cash Platinum Mastercard
Provides one per cent cash back on everything. Comes with insurance benefits most no-fee cards don’t. No annual fee.
BMO CashBack World MasterCard
Provides 3% cash back on fill-ups at Shell, discounts on car rentals. Monthly spend of $2,000 nets about $265 in cash back. Annual fee of $79.
NOTE: American Express cards weren’t included. Amex was not a part of interchange agreement. For more see here.
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