The Canadian credit card market is a particularly challenging one for card issuers, both because Canadians are inordinately attached to using their Interac debit cards, and because the market for credit cards is virtually saturated. As a result, issuers have stepped up their efforts to differentiate card products by increasing the available combinations of terms and rewards, especially at the higher end of the market, which has continued to perform well despite the economic downturn.
The Globe and Mail reporter quotes Howard Grosfield, chief executive officer of American Express Canada Inc.: “What you’re seeing is, in the last 12 to 18 months, almost every issuer in the Canadian marketplace has either refreshed or launched a brand new premium, annual-fee based rewards product … really going after the upper end of the market, the high-spending customer.”
The path forward in premium cards is not entirely clear, however, because the Canadian Competition Bureau believes that the higher fees charged by Visa and MasterCard for processing premium card transactions is harming merchants and consumers, in particular because the rules of the networks do not allow merchants to refuse the premium cards. The Competition Bureau initiated legal action against both leading card networks in December 2010, and industry watchers will await the outcome of that process.
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