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CIBC picks up Costco credit card business
September 2, 2021
3:23 pm
Loonie
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CIBC has made a deal with Costco. The CIBC card will come out next year and will be automatically sent to CapitalOne Costco cardholders (or so the article suggests).
There is an article in FP but I don't have a link.
Apparently Costco cardholders have over $3 billion in outstanding balances, which CIBC wants to acquire as their total would then be about 13 billion. (Good grief! - and the article says Costco cardholders are considered affluent!)

There used to be a saying levelled at those with many opinions but few financial resources, which was "if you're so smart, why ain't you rich?" This humongous debt load, at only one bank and at horrendous interest rates, suggests a better one might be, "If you're so rich, why ain't you smart?"

September 2, 2021
4:55 pm
HermanH
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Loonie said
"If you're so rich, why ain't you smart?"  

The response would likely be, 'I'm so rich that I don't have to give a darn.' sf-laugh

September 2, 2021
6:05 pm
User230
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I might actually get this card.

If it were TD or Scotia I would not have gotten the card.

CIBC has had some okay offerings for cards in the past.

Costco likely had a sweet deal to partner with CIBC. So the rewards might be low.

Likely tiers, likely categories. Do not really need a card like that.

Hoping for a no FX fee card. With 1% unlimited and with unlimited 2% on 3 categories. Something like Tangerine use to have.

We will have to wait and see.

September 2, 2021
6:18 pm
Loonie
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HermanH said
The response would likely be, 'I'm so rich that I don't have to give a darn.' sf-laugh  

I think a lot of them are actually running scared, with lifestyles beyond their means and little saved. Read The Millionaire Next Door if you haven't; quite revealing in this regard.

September 2, 2021
7:29 pm
HermanH
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Loonie said
I think a lot of them are actually running scared, with lifestyles beyond their means and little saved. Read The Millionaire Next Door if you haven't; quite revealing in this regard.  

Or, the optimist would say that they are always confident in finding new money or business ventures so they don't sweat today's money, since there will always be more tomorrow. sf-cool

September 3, 2021
5:44 am
Loonie
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They may indeed be optimists. The research seems to suggest, however, that the "affluent" who are indebted to their CC companies at such high interest rates are cash poor and will likely remain so until they sell their properties - which are also mortgaged. Ultimately, though, the CC companies will get their due and are happy with monthly minimums and rapidly accumulating interest due. That, after all, is why CIBC bought this business. They bought the debts and mailing list of the so-called affluent. The book distinguishes between the so-called affluent, who have large salaries and spend it all, and the multimillionaires, typically entrepreneurs, who hang on to their money.

It will be interesting to see if CIBC maintains the same perks that came with the Capital One card. They might do it for a while so as not to lose customers but I would imagine they will tweak it later. Those who owe will still owe, regardless.
I would like to see a CostCo card that paid a decent reward for shopping at CostCo, but it seems probable that they won't allow that. If I remember correctly, the CapitalOne card only paid 0.5% for CostCo purchases.

September 3, 2021
8:20 am
BestBankerEver
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Is Costco Wholesale really selling at wholesale prices? Likely not. And now that Coscto is once again changing why not just get your own "best return" credit card that will work there?? Personally I am not following them around like a little puppy dog and waiting to change to their new credit card. And also watch their drug pricing....last time I did a pick up the cost was 140% more than last time. Costco is in bed with many suppliers.

This new arrangement seems to be different than last time. As CIBC will issue a new Costco card. Last time Amex sent a new one that was cash back and of course not useable at Costco and you had to apply for a Capital One card.

Is Capital One leaving Canada???

September 3, 2021
8:25 am
Loonie
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Prices are going up everywhere. Did you find the same drug cheaper anywhere else at the same time?

September 3, 2021
10:01 am
gicjunkie
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So, I guess that Costco will then only be accepting VISA cards for payment? (currently MC) I'm getting tired of this credit card roulette they are playing. I have been enjoying using only one card for all my purchases. At least it's not AMEX again. Now I'll have to figure out which VISA card will best suit my needs.

September 3, 2021
10:09 am
HermanH
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BestBankerEver said
And also watch their drug pricing....last time I did a pick up the cost was 140% more than last time. Costco is in bed with many suppliers.

A quick Google search is all you need to learn of the Costco price-fixing schemes for things like TVs and generic drugs.

September 3, 2021
11:57 am
cristunity
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A lot of house-rich, cash-poor folks are ragging the puck and waiting for their parents to take the one way bus into the sky, so they can cash in on some sweet inheritance dough. It's evil and cynical and wrong, but a lot of people are evil and cynical and wrong.

Of course, these kids won't talk about it -- in fact, they go to the other end and pretend that it's the last thing on their mind ("inheritance? what inheritance? Oh, I'm not expecting anything..."). But it's central to their whole upward mobility and retirement strategy. Just like some very poor people count on winning the lottery, some wealthier people count on the Grim Reaper doing his part. I wonder if at some point when someone dies there will be an audio jungle that goes "WINNER, GAGNANT!"

If there was some kind of movement where a whole whack of seniors decided to re-write their wills and give their awful kids 4 or 5 figures (if anything) instead of 6 or 7 figures, the level of panic that would erupt in this country would make early pandemic days seem like a trip to Disneyland.

September 3, 2021
12:00 pm
AltaRed
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gicjunkie said
So, I guess that Costco will then only be accepting VISA cards for payment? (currently MC) I'm getting tired of this credit card roulette they are playing. I have been enjoying using only one card for all my purchases. At least it's not AMEX again. Now I'll have to figure out which VISA card will best suit my needs.  

It will be a Costco branded CIBC Mastercard per https://www.cibc.com/en/personal-banking/credit-cards/costco.html

Any MC issuer will do. We use a Cap1 generic MC card at Costco and everywhere else.

September 3, 2021
2:58 pm
BestBankerEver
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HermanH said

BestBankerEver said
And also watch their drug pricing....last time I did a pick up the cost was 140% more than last time. Costco is in bed with many suppliers.

A quick Google search is all you need to learn of the Costco price-fixing schemes for things like TVs and generic drugs.  

Costco uses a lot a Apotex generic. The VP at Costco has been fined for negotiating with Apotex and as well Apotex has been fined for price fixing.

I find a 140% for a generic is outrageous. And I have done a comparison of cost of generic vs brand name and this one drug is far away from the average spread of a generic vs name brand.

There is much more to my story on this one. 2 years ago it went up to same price as was just charged. I spoke to Costco 2 years ago and was fully refunded and the price dropped back to its regular price and then 2 years later goes back up to that same price.

Costco also tells me any generic for the same drug is the same price.

I feel Costco in more in bed with Apotex than us "members". I can say..I no longer trust Costco.

September 3, 2021
3:01 pm
BestBankerEver
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Loonie said
Prices are going up everywhere. Did you find the same drug cheaper anywhere else at the same time?  

No. Blue Cross posts many prices and they all increased to the same ball park within cents. But my refill was picked up 2 weeks after ordering...with the new price. I checked the Blue Cross and still showed the old pricing so I called them on it. And low and behold all the Blue Cross prices went up before Costco answered me. Odd eh???

September 3, 2021
3:17 pm
gicjunkie
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AltaRed said

It will be a Costco branded CIBC Mastercard per https://www.cibc.com/en/personal-banking/credit-cards/costco.html

Any MC issuer will do. We use a Cap1 generic MC card at Costco and everywhere else.  

Thanks for the heads up. Must have missed that one. We use the Rogers MC on pretty much everything.

September 3, 2021
11:02 pm
Norman1
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Loonie said
…Apparently Costco cardholders have over $3 billion in outstanding balances, which CIBC wants to acquire as their total would then be about 13 billion. (Good grief! - and the article says Costco cardholders are considered affluent!)

Outstanding balances are not the balances that are carried and not paid off each month. The Financial Post article doesn't disclose how much of that $3 billion is not paid off each month.

About half the cardholders pay off their card balances each month. I would guess about $1½ billion of that $3 billion is repeatedly paid off each month and spent again the following month.

September 4, 2021
3:59 am
Loonie
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Perhaps but, as you say, you are guessing.
We ARE told that it's these balances that make the deal very attractive for CIBC, and we do know what kinds of interest charges apply . (They will also make money from the merchants on all CC purchases.)
Even at 1.5 billion, it's a horrific amount of debt. And this is only one credit card offered by one bank. Even if your guess is correct, that would mean that Canadians carry an interest-bearing CC debt of over 7.5 billion to CIBC alone.

TransUnion says the average credit card debt as of last Feb was $3448. Google tells me there are nearly 31 million adult Canadians. It is unclear to me whether the TransUnion figure is per indebted person or per Canadian adult or per card issued, bu I didn't read the entire report and it may not be stated. Either way, it's a depressing amount of money. One could easily be paying 1000 annually on the interest and still never getting anywhere.

I find it more than ironic that, on the one hand, Canadians are urged to be responsible about their debts and pay off CC debt and limit spending to what they can truly afford, but on the other hand the banks get upset because they lose money when people do exactly that as some have done during the pandemic. Perhaps people will get to like owing less or no money when they experience the benefits.

September 4, 2021
8:46 am
Norman1
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$3 billion or $1½ billion over millions of cardholders isn't much per cardholder.

Yes, it unfortunate for the cardholders who are carrying 2X the average $3,448 = $6,896 at 18% per annum while the other half are paying their card off every month and carrying $0.

I think some people have issues with delayed gratification. Just can't wait a year or two to save up for that vacation or shiny bauble. One has the credit card and can use it to go on the vacation next month or have the shiny thing now!

September 4, 2021
8:53 am
Norman1
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It is only those banks that don't have a wealth management business that mind if one pays down debt.

All the Big Banks have wealth management offerings. So, if one doesn't spend the money, one would invest the money and the money would likely end up in one of their wealth management products.

September 4, 2021
9:50 am
Loonie
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Norman1 said
It is only those banks that don't have a wealth management business that mind if one pays down debt.

All the Big Banks have wealth management offerings. So, if one doesn't spend the money, one would invest the money and the money would likely end up in one of their wealth management products.  

Maybe, but that's highly speculative. There's lots of other things they could do with that money, including paying down debt elsewhere - car , mortgage, student loan etc. We have, for example, 3 credit cards. Two of them are with major banks with whom we have no other business and the other is not with a retail bank.
It's true that they will WANT to steer these new customers towards other products. But CCs are particularly lucrative on unpaid balances. After 3-4 years, the bank has recouped its loan and the rest is a very rich gravy - maybe for decades to come - and they will still come calling for the principal in the end.

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