How Do You Create a Better Credit Card?

I love Canada (Happy 150), but one thing I don’t like about us is our credit cards. We’ve got the big 5 banks. Everyone issues their average Visa Infinite or World Elite Mastercard. While the rewards are slightly different, they all are along the same vein. You earn $1 point per dollar, and that’s equal to approximately 1-2% in rebates or 1 airline/hotel point on everyday spending. Boring. So, how do you build a better credit card?

I would really love is for someone to shake up the market. It’s not that hard. Sure, we might have slightly lower interchange rates, but from what I can see, it’s only marginally lower. A Canadian Visa Infinite Privilege/World MasterCard swipe fee is 2.08/2.06%, while in the US, it’s 2.3%. That’s a 10% difference. I’m pretty damn sure, however, that our cards are more than 10% worse than our American counterparts. Yes, we have lower economies or scale, but so does any other market in the world.

Canadian Credit Card Interchange Rates - Source:

Canadian Credit Card Interchange Rates – Source:

Building A Better Credit Card

For example, lower the requirements to get a Visa Infinite Privilege, turn it into metal, add some travel benefits, and increase the welcome bonus. Then you’ve got a Chase Sapphire Reserve. If you don’t know anything about that craze, these two articles from the New York Times and Bloomberg should give you sufficient background about the success of those cards.

Now, you say, the 100,000 point bonus probably cost Chase a lot. That is true. I don’t disagree with you. But, you can still improve your card without increasing the amount of money you “lose” per new cardholder you acquire. I can’t craft the numbers because I’m just a consumer, but it only takes one bright employee at a credit card issuer to propose something that drastically changes the game. I’m sure there’s some way to do it that doesn’t lose money. There’s got to be a way to make it work for both consumers and issuers.

So your card is now metal. That probably costs $5 per card at most if you have high volumes. The value from that alone is in word of mouth marketing is probably multiples higher of what it costs to make the card.

American Express Platinum - Metal Card

American Express Platinum – Metal Card

Improving travel benefits can’t cost you a lot. The best comparison I have is the milepoint Premium package years ago. That cost $49.95. It was sold by an online forum for it’s members, and included National car rental status, Hilton Gold status, other discounts and offers that consumers valued at much more than $50. Otherwise, it wouldn’t have sold out. Negotiating with Priority Pass (or DragonPass, or Lounge Key, etc.) isn’t too hard, given how much competition they’re facing. In the US, you can get one for just $50 for unlimited visits and guest privileges.

To offset this, kick up the annual fee to $499. Or $549, or $599. That should be plenty to cover the increased benefits you’re adding. Travel rewards are the most profitable sector of the marketplace, and individuals and families in higher income brackets tend to value these the most.

Then, raise the minimum spend to keep the card top of wallet. Instead of getting the bonus after your first purchase, or spend $1500 in three months to get the bonus, get consumers to spend $5000 within the first 6 months, and then another $5000 to get the other bonus. $10,000 over six months only means $1666 a month, which can’t be too hard for affluent folks, especially those adding authorized users for families and significant others.

Getting consumers to use only this card for six whole months means that you actually may increase market share. It also removes all the freeloaders who normally get the card, buy a coffee, and pocket the 15,000 points they use for gift cards. Finally, add in some sleek advertising, some intelligent marketing, and you’ve got a hit. It doesn’t even have to be a cult obsession. Just make it newsworthy, and actually valuable for consumers.

The Chase Sapphire Reserve Cult

The Chase Sapphire Reserve Cult

This doesn’t change anything else in your cards. I’m not talking about reducing foreign transaction fees. I’m not talking about interest rates, or bonus points on categories (which right now are lame and capped anyways). There’s some cartel in Canada that keeps the market perfectly even, so that’s that. But with what i just mentioned, you now have a card better than the American Express Platinum Card, the high-end card in Canada.

I will laugh very hard if this does happen two years from now. If anyone from RBC, TD, BMO, Scotia, or CIBC is reading this, you know how to reach me. 🙂

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  1. The huge difference between US cards and Canadian cards is FOREX.

    If any card in Canada drops the FOREX fees then this immediately becomes my go-to card for a significant amount of my annual spend.

    We do have Chase Marriott Rewards with free FOREX (at a slightly less attractive exchange rate) but in my view Marriott Rewards points are pretty much useless.

    So please bankers – give us a FOREX free card!

  2. Agreed.
    Canadian credit cards are garbage compared to US credit cards.
    We need cards with better point earnings for every day spend and with no foreign exchange fees.
    Also the usual 15,000-25,000 sign-up bonus points are an insult…sign-up bonuses should be at least 50,000 points or more.

  3. American Express Platinum cards in Canada really need up their game especially when they offer so much more benefits in the US.

    I’d love to see Scotiabank offer a card like Chase Ink cards in the US where they have airline transfer partners and x3 category spend bonus.

  4. How is having a credit card made out of metal instead of plastic a benefit to me as a consumer? Even if some people find it different and make it a conversation topic, I guess that might create some additional awareness among some consumers for the issuing bank, but I don’t see why that would improve the chances of me actually signing up for one. I just can’t see what use or value I would ever realize from the material they produce my credit cards from.

    If someone were to tell me about the great travel insurance benefits or forex rates their new credit card comes with, I might look into it. However, if my friend were to tell me about how their new credit card is made of metal, I’d probably look at them like they had two heads.

  5. I think credit cards are pretty lame in Canada because the industry is terrified that swipe fees will be regulated, which pretty much destroys the very lucrative rewards card business (just look at what’s happened in Australia and other countries that did this).

    The Harper Government was very much in the pocket of the small business lobby, but they backed down and only implemented a “voluntary” code in which Visa and MasterCard “agreed” to cap their “average” swipe fees at 1.5%. This is why the premium Visa and Mastercards now have very high annual income requirements — it reduces the number of cards at that level being issued, and thus keeps the average down while keeping the banks’ best customers happy.

    American Express is not part of the “voluntary” code, and generally has better reward cards, but not nearly as good as in the States. Why? No competition.

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