Low-Rate Credit Card Market Warms Up In Canada

American Express Canada has propelled another salvo in the competitive world of low-rate Visa cards, offering a no-charge card with a yearly interest cost that is beneath many different cards. The AmEx Essential card will convey a yearly rate of 8.99%.

A government overview of 189 credit cards done by the Financial Consumer Agency of Canada demonstrates that many cards convey standard yearly rates in the 19 to 20% range. Now and again, the rate can go as high as 30%. As indicated by the office’s Mastercard selector tool, various establishments, including MBNA, Desjardins, Citizens Bank, Laurentian Bank, ATB and even a couple of the huge banks, offer “low-rate” cards in the 9.90% to 14.99% range. MBNA offers a True Line card with rates as low as 5.99%, contingent upon a man’s credit evaluation. More than 25 cards convey rates beneath 13%. Yet, a hefty portion of the low-rate cards charge yearly expenses. The AmEx card does not.

So this no-yearly expense, low-rate card from American Express is raising eyebrows among some credit industry watchers.

American Express Canada demands in a release that the new rate “is not a promotional rate and does not have a predetermined expiry date.” But rather it likewise calls out attention that it isn’t ensuring the rate won’t increase later on. The launch of the AmEx card comes during a period when credit card operators face more rivalry from such new payment technologies as Apple Pay, which permits clients to pay for things through their iPhones.

“It’s an incredibly low rate,” said Laurie Campbell, who heads up Credit Canada Debt Solutions, a non-profit credit counselling agency.

She speculates that the company may be trying to attract a more mainstream clientele. Campbell notes that some merchants don’t accept American Express cards, citing high transaction fees.

“Read the fine print,” Campbell advises.

The Essential card also allows people to carry over balances from month-to-month as long as they make minimum monthly payments. Some AmEx cards require people to pay the balance in full each month.

The Canadian Bankers Association says 56% of Canadians pay off their credit cards in full every month. The rest convey a balance. So for them, low-interest rates are a more vital thought than yearly charges. For the individuals who don’t convey a balance from month-to-month, credit advisors say a no-yearly charge card generally bodes well. The interest rate would be insignificant as no interest would be charged.

“You should always strive to pay [your balance] in full each month,” Campbell says.

“While many of our customers don’t carry a balance regularly, there are those that have expressed the desire for more choice when it comes to using credit” AmEx spokesperson Erica Tiangco said in an email. “The launch of this product is an opportunity not only to attract new prospective card members, but to also provide more choice.”