I use a rewards credit card for my groceries, gas and recurring monthly bill payments.  I like earning a rebate on my everyday spending and freeing up cash-flow by deferring the payment for 30 days.

For years I used the PC MasterCard and earned 1 per cent back in PC Points, but recently I switched to the MBNA Smart Cash MasterCard using this promotion at Great Canadian Rebates offering a $60 rebate to sign up for the card.

The MBNA Smart Cash MasterCard is one of the top cash back credit cards in Canada, and in addition to this $60 rebate, the card also offers the following features:

  • No annual fee
  • 5% cash back on qualifying net retail gas and grocery purchases for the first 6 months
  • 2% cash back on qualifying net retail gas and grocery purchases thereafter
  • 1% cash back for all other qualifying net retail purchases

I’ve already received $160 in cash-back rewards in just three months with the aggressive sign-up offer and generous incentives for the first six-months of spending.

MBNA Canada: Marketing Masters

MBNA Canada quickly became the largest issuer of MasterCard’s in Canada by using affinity marketing techniques to secure the endorsement of over 5,000 organizations, including sports teams, charities, financial and educational institutions.  MBNA Canada markets its MasterCard’s aggressively through direct sales, telemarketing, Internet, and point-of-sale techniques.

Their aggressive marketing tactics don’t just stop when you sign-up for the card.  I have received seven phone calls from MBNA Canada at various times of the day over the past two months.  Sometimes there is no one on the other end, like they’re trying to determine the best time to call me.  Other times, a telemarketer is on the other end pitching one of the following products:

Credit Alert: Identity Theft Protection

The first pitch that MBNA Canada tried to sell me was for their Credit Alert monitoring service that helps protect against identity theft.  For $17.99 per month I can sign-up for this service, which offers:

  • Online access to your credit report and credit score from Equifax Canada.
  • Detect early signs of fraudulent activity before it ruins more than your bank account.
  • Proactively monitor, manage and protect your valuable credit and identity information.

What I found interesting was that the telemarketer used this line:

“Since you recently reported your card lost or stolen, you know the importance of protecting your personal credit information from those who might abuse it.”

I only had this card for a few months at that point and had not reported it lost or stolen.  And why should I pay for a service that the MBNA account agreement already provides, free of charge?

According to the agreement, if a fraudulent charge appears upon your statement, you won’t be held responsible for any unauthorized use of your card, PIN or account number.

Credit Wise: Balance Protection Insurance

The second call that I received from MBNA Canada was to promote their Credit Wise balance protection insurance.

For $0.99 per $100 of the average daily balance, cycle ending balance or balance subject to finance charges, whichever is higher, I can protect my good credit rating in case of unexpected job loss or disability and can ease the burden on my family in the event of my death.

Access Cheques

The phone calls weren’t working on me, so the next attempt from MBNA was a direct mail piece promoting their access cheques to arrange a balance transfer or deposit.  The letter suggested that I can use the attached access cheques for so many things, including:

  • Visiting friends and family – create some memories that will last a lifetime
  • Holiday shopping – the people you care about deserve the best
  • Planning a winter getaway – You work hard; treat yourself and your family to a holiday

Sounds intriguing, but a quick glance at the fine print suggested that this wasn’t such a good idea for me.

The annual interest rate for access cheque balances is 19.99 per cent, and the transaction fee for access cheques is 1 per cent of each transaction amount, with a minimum fee of $7.50.

A Lesson For Rewards Chasers

Credit card issuers are offering more rewards than ever before to try and secure your business.  But they’re not just going hand out juicy rewards without taking a cut for themselves.  With revenues close to $600 million, MBNA Canada makes a lot of money off high interest rates and programs like the ones listed above.  On December 1st, MBNA was sold to TD Bank Group for an undisclosed amount.  It will be interesting what kind of impact this has on MBNA customers.

When used responsibly, credit cards are a great financial tool that help people budget effectively, manage their cash-flow, and earn rewards.  Just make sure that you don’t fall into the credit trap.  Pay off your balance each month and don’t get sucked in by credit card companies and their aggressive marketing tactics.

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10 Comments

  1. Michael James on December 5, 2011 at 7:17 am

    Interesting post. This reminds me of being in a restaurant and fending off the repeated queries about whether I’d like some high-margin items with my meal.

    • Echo on December 5, 2011 at 7:47 am

      @Michael James – I guess I’m the one ordering the special and drinking tap water. Restaurants hate those people 😉

  2. T.M @ My University Money on December 5, 2011 at 8:21 pm

    Were you only in the market for a cash-back card? I don’t have quite the income level yet (another couple years), but it looks to me like the Capital One travel/reward card is pretty phenomenal (as long as you pay the balance off monthly of course).

    • Jeff on December 7, 2011 at 2:05 pm

      T.M. stay away from Capital One. I was with them for 10 years, and as you grow older your needs change. Capital One will not change with you. Capital One’s accounts have fixed terms, meaning that when newer products come out with better rewards, interest rates, and annual membership fees, you cannot change your product, You’re stuck with what you have. For example I had a 9.9% APR interest rate on my card for 10 years. No cash back, no rewards, nothing. It had an annual fee of $99.00. They offer the same card now for $49.00 with 1% cash back, rate of 9.9%. They will not give you the same terms as new clients (remember these are fixed, not teaser rates). You also cannot apply for a second account. (unless you have one of their Plain Jane non-rewards accounts). They keep the terms fixed and push for recent graduates and people with tarnished credit. Once you’re established there is a world of better products out there, and Capital One knows it. When you go to ask for a change in terms, or even a line of credit increase, the answer is no, “they periodically review accounts for credit line increases” you can’t ask for one. Now, this is most likely a first account for most people. When Capital One won’t negotiate, they’ll remind you that your account is possibly one of your oldest, and if you cancel it, it will account for about 15% of your credit rating as it is your oldest established account. You’re going rethink this, and pay their fees because you don’t want to hurt your credit score (and its true by the way) They’ll even tell you to just keep it open (and pay their fees) and get another credit card elsewhere if you like. See, they have you hooked until you want to make the jump without caring about your credit score – One, that I finally did this year after paying $1000 in membership fees over the past ten years! This is how they make lots of money, dormant accounts that require no billing, no processing, but just pure annual profit in fees, now times that by the tens of thousands of accounts that are open and not used – a huge profit for absolutely nothing. You’re better to go with your local bank, and ask them if you can change products down the road or renegotiate your fees, most will. I’ve been successful doing this with RBC, Scotiabank, TD and Canadian Tire. In time as well these companies may lower your rate. (Canadian Tire was a small $700 card at 25.9% , 5 years ago, no fees, and now it’s over $11,000 at 11.50%, and still no fees). Stick with a local bank, do a good job of managing your credit, and don’t fall for the bait and lock tactics of Capital One. You be in control of your credit, don’t leave it to Capital One (also Capital One only allows 20% of your credit line for cash – most don’t use it, but if you ever had an emergency out of the country, you’ll be stuck) the others all make your full line available. If anything with any credit card, make sure you read and understand the fine print, ESPECIALLY the fine print that comes with a Capital One account. A teaser rate now can leave you paying fees for the rest of your credit life!

      • Jeff on December 7, 2011 at 2:19 pm

        Typical hidden terms found in a Capital One online application; cut and pasted here:

        “Acknowledge that if I am currently a Capital One cardholder or have applied for a Capital One account within the last 45 days, I will not be approved for this offer; and…”

    • Echo on December 7, 2011 at 3:28 pm

      @TM – I was looking for a cash back card, and it was a choice between the Scotia Momentum Visa, the Capital One Aspire World MasterCard, and the MBNA Smart Cash card.

      Ultimately, the $60 incentive was enough to sway me towards the MBNA Smart Cash Card.

  3. Jeff on December 7, 2011 at 1:49 pm

    This will most likely be one of the last offers for great rewards, and fixed low APR credit cards from MBNA. MBNA officially became a division of the TD Bank Group on December 1, and within 18 months will be completely absorbed into TD Canada Trust. TD already has it’s eyes set on raising the interest rates of existing accounts, and getting out of rate teasers for new accounts. They’ve even set aside financial resources to cover losses for those with high credit lines (then TD would allow) and high balances at very low APR’s (so low intact, TD doesn’t even give these rates on secured lines of credit) expecting accounts to default when they’re jacked up to the traditional TD 19.9/21.5% APR. TD also has provided expect losses for a percentage of accounts who will flee TD for lower rates. MBNA always applied payment to balances with higher interest rates below lowest, TD is opposite, and just this week notices were received that MBNA accounts will have payments applied just like TD, to take advantage of borrowers having to pay higher interest rates longer. TD walks a very fine line of predatory lending. TD has brought this style to it’s US bank, and former Commerce Bank customers are leaving in droves, hating TD and it’s usury ways!

    With Bank of America MBNA gone, and Citibank gone to CIBC – we will be going back to traditional Canadian style high interest with smaller rewards as (besides Capital One – and there are good reasons to avoid them) were back to the big 5, little to no US competition to make the Canadian banks work a little harder for our business.

    • Echo on December 7, 2011 at 4:16 pm

      @Jeff – thanks for your insight. Many people are wondering what will change with MBNA after the TD purchase.

  4. bill on April 12, 2012 at 11:08 am

    exactly what Jeff mentioned that TD will expand its preditory lending culture,personaly I have over the years gained the highest credit rating, the bank and stock meltdown robbed me of retirement enjoying a decent lifestyle, I have now sold my home and live in a small rented appartment,I draw cash from my bank accounts daily at the rate of 100 dollars a day approximately 3000 dollars a month, this monthly money deducting 500 for rent and 200 for food,leaves 2300 dollars I stash in a safe hidden in my home ,my old age pension and cpp are a year away,I am now running my credit cards up withdrawing the max cash I can and paying minimal payments at months statement,I have 40 cards now and am at the stage where most are maxed,so I try to aquire more cards but am now at the end of offers,in a year I will have acquired almost $675,000 that no one knows of as its all in cash, and hidden ,on my retirement date I plan to declare personal bankruptcy,it will feel like a personal satisfaction that I was able to recover some cash back after years of being fleeced by the banks,this plan of course is not for everyone,but to be honest I dont feel any guilt the last thing I would ever do is scam anyone,just that the banks deserve it,anyway Im off now to buy a small fishing boat,nothing flashy or expensive you understand,just big enough to spend a nice summers day on,….of course Ill be paying cash….regards Bill

  5. Wayne on May 24, 2012 at 1:46 pm

    These people at pc financial really do suck. They will take your money from your account and give it to a third party without your knowledge and consent and without a court order. That’s a criminal offense with jail time and a fine. AVOID THEM LIKE THE PLAGUE!

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