On December 1st, MBNA Canada sold its credit card business to TD Bank Group for an undisclosed amount. Many MBNA customers are wondering what this transaction means for their account.
MBNA Canada is the fourth largest credit card issuer in Canada and the largest issuer of MasterCard’s. TD Bank’s combined Canadian credit card business will total about 5.8 million active accounts.
Toronto-based TD said it expects the combination to be completed in about 18 months. In the meantime, MBNA Canada will continue to operate on a stand-alone basis. Credit card companies typically bundle the balances their customers carry and sell them as investments.
MBNA Canada: Changes Coming?
According to one bank insider, this sale could mean that big incentives like the $60 rebate to sign up for the MBNA Smart Cash MasterCard will soon come to an end. Great rewards and fixed low APR credit cards from MBNA Canada will disappear within 18 months after the credit card division is completely absorbed into TD Canada Trust.
TD is already looking at raising interest rates of existing accounts and will stop offering rate teasers for new accounts. They’ve even set aside financial resources to cover losses for customers with higher credit limits than TD would have allowed.
MBNA Canada has always applied payments to balances with higher interest rates before lowest. TD works the opposite way, and has sent notices to MBNA customers that they will now have payments applied as per the TD credit card standards in order to take advantage of borrowers paying higher interest rates for a longer period of time.
Rewards Credit Cards in Canada
It will be interesting to see what actually transpires with this change to the rewards credit card landscape in Canada. We have always got the short end of the stick when it comes to rewards, especially compared to the juicy rewards that our neighbors to the south receive from their rewards cards.
With MBNA Canada sold to TD and Citibank sold to CIBC, we may be headed back the way of high interest rates with smaller rewards like we typically see from the big banks. There’s little to no U.S. competition to make our Canadian banks work harder for our business.
We can only speculate what these changes will bring to consumers. Let’s hope all of these credit card companies, including MBNA Canada, continue to give smart spenders a chance to earn big rewards for a long time.