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RBC Target Mastercard
April 2, 2015
9:25 pm
GS1
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I received a letter today from RBC that included this:

"After all Target stores across Canada have closed, your card will no longer be active. Any outstanding balance will remain on your account until it is either paid in full or you have asked us, and we have agreed, to open a new RBC Royal Bank credit card for you and transfer the balance to that new credit card account.

"Please call us ar 1 866-854-6893 if you would like to discuss other credit card options we may be able to offer."

It would be interesting to know the number of accounts RBC managed to attract. I was an early adopter and my wife and I likely got the 614th and 615th cards, or perhaps some smaller number.

GS

April 3, 2015
10:04 am
kanaka
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I would imagine most will pay off and move on. Here is the reason why I say.

I used to have an Amex Costco card and we all know that Costco abandoned Amex and went with MasterCard. Amex sent us letters saying what they were going to do as their attempt to keep us as Amex customers. They mailed their new Simply Cash Amex cards with the same account number as the Costco card. You would be able to use the new card as soon as received, at Costco til the cutoff date. We received the new cards and never called into comfirm receipt of them just to see if they would follow up to see if they would contact us to confirm if we had received them in the mail and/or what our intentions were. NOTHING HAPPENED! So when I checked online they still showed and with a 7000 credit limit, so since I had cut them up I thought is should cancel them as the 7000 is still a liability as far as a credit check goes. I contacted them by secure email and they asked why it was that we no longer required them. I decided that I was not going to explain our process in the need or selection for a credit card nor was I going to succumb to shopping at Costco with their "preferred" card and have me jump through hoops every 5 years when they decide to make a change. Amex also made me an offer of a period of time (12 months?) of interest free along with wanting to hear why my decision would be to cancel the card. In my second email I asked them to cancel the card and they said they would pass my request on. I had no idea my card was cancelled until I checked online.

Amex customer service is very good. Their decision to create Simply Cash and retain the customer base seems to have been a failure as they have also been doing a bit of TV advertising for the card as well.....assuming it is not doing well.

I think most of us have credit cards for our preferred needs and as Costco went to MasterCard we have always had Air Miles MasterCard and we also have 2 Amex Air Miles cards.....so no need for any thing else. I know what we made on the Amex Costco card in a year and will see what Air Miles makes in a year before we make any decision for a new credit card.

And Costco USA is going to Visa?

I think RBC is being cautious after seeing how the Amex Simply Cash has failed?

April 3, 2015
10:27 am
AltaRed
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Assuming Amex Simply Cash has failed. Where do you get that information? I moved to Simply Cash because I want an Amex strictly for "Front of the Line" concert tickets from Ticketmaster. FWIW, I don't think much of 'affinity' cards. I only ever want Cash Back cards to do with the rewards cash as I wish.

April 3, 2015
10:44 am
Doug
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GS said

I received a letter today from RBC that included this:

"After all Target stores across Canada have closed, your card will no longer be active. Any outstanding balance will remain on your account until it is either paid in full or you have asked us, and we have agreed, to open a new RBC Royal Bank credit card for you and transfer the balance to that new credit card account.

"Please call us ar 1 866-854-6893 if you would like to discuss other credit card options we may be able to offer."

It would be interesting to know the number of accounts RBC managed to attract. I was an early adopter and my wife and I likely got the 614th and 615th cards, or perhaps some smaller number.

GS

Thanks, Greg, for your always thorough and interesting analysis as always. The thing I find the most interesting is that they've simply kept the credit card number, and balance, in their system but not an active credit card. I would've thought that they would've automatically transitioned it to the RBC Cash Back MasterCard or something like that. The fact they went to the point of saying that unless you apply to convert it, and they agree to convert it, likely indicates the approval threshold of the RBC Target MasterCard may be somewhat lower and, consequently, of a lower credit quality.

I'm curious how you got the "614th and 615th" credit cards? Are you simply taking the last four digits of the card? Have you taken into consideration that other RBC-branded MasterCards may share the same BIN (first four digits) of the card? At any rate, I suspect adoption was not that high - Target Canada more heavily promoted their in-house Target REDcard debit card and the RBC card was only 0.5% rewards elsewhere (not that competitive). At most, I'd suspect an average of 200+ RBC Target MasterCards per store, possibly as many as 500+ per store.

RBC Royal Bank is very likely within several years of losing the Shoppers Optimum Banking Account and MasterCard contract. I suspect they likely have a five-year agreement, with an optional five-year renewal, or a ten-year agreement, with an optional early termination provision after five, and are waiting Loblaw out. Loblaw, for its part, is likely itching to offer the PC Financial MasterCard in Shoppers Drug Mart stores, possibly a co-branded Shoppers Optimum by PC Financial MasterCard.

Cheers,
Doug

April 3, 2015
11:02 am
Doug
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kanaka said

I would imagine most will pay off and move one. Here is the reason why I say.

I used to have an Amex Costco card and we all know that Costco abandoned Amex and went with MasterCard. Amex sent us letters saying what they were going to do as their attempt to keep us as Amex customers. They mailed their new Simply Cash Amex cards with the same account number as the Costco card. You would be able to use the new card as soon as received, at Costco til the cutoff date. We received the new cards and never called into comfirm receipt of them just to see if they would follow up to see if they would contact us to confirm if we had received them in the mail and/or what our intentions were. NOTHING HAPPENED! So when I checked online they still showed and with a 7000 credit limit, so since I had cut them up I thought is should cancel them as the 7000 is still a liability as far as a credit check goes. I contacted them by secure email and they asked why it was that we no longer required them. I decided that I was not going to explain our process in the need or selection for a credit card nor was I going to succumb to shopping at Costco with their "preferred" card and have me jump through hoops every 5 years when they decide to make a change. Amex also made me an offer of a period of time (12 months?) of interest free along with wanting to hear why my decision would be to cancel the card. In my second email I asked them to cancel the card and they said they would pass my request on. I had no idea my card was cancelled until I checked online.

Amex customer service is very good. Their decision to create Simply Cash and retain the customer base seems to have been a failure as they have also been doing a bit of TV advertising for the card as well.....assuming it is not doing well.

I think most of us have credit cards for our preferred needs and as Costco went to MasterCard we have always had Air Miles MasterCard and we also have 2 Amex Air Miles cards.....so no need for any thing else. I know what we made on the Amex Costco card in a year and will see what Air Miles makes in a year before we make any decision for a new credit card.

And Costco USA is going to Visa?

I think RBC is being cations after seeing how the Amex Simply Cash has failed?

That's correct about Costco in the U.S. (and globally, excluding Canada) switching to VISA and going with Citibank, N.A., beginning early 2016, to offer the Costco VISA. Capital One Canada is offering the Costco Canada MasterCard.

Combine this with American Express loss in a recent antitrust lawsuit over payments and merchant services, a declining travellers' and gift cheque business and they are, quite likely, going to end up a niche business a la Western Union. The next shoe to drop will be - will Buffett sell his shares? As well, with AMEX, you can't get a cash advance to save your life - so much for emergency encashment assistance if travelling worldwide. :(

I'm a value investor and used to like American Express but even I have been burned by declining businesses (i.e., Yellow Pages Group Co.) and would rate them a "sell". VISA and MasterCard are simply "holds" - I'd love to buy them but can't stomach the premium I'd have to pay (not buying VISA and Google at their IPOs, thinking they were "expensive," were my worst examples of indecisiveness).

And...in the "still to come," besides RBC likely losing the Shoppers Optimum business, Sears Financial is now almost 5 months into a 12 month countdown to the shutdown of their MasterCard and private-label credit card business. If they can't get a buyer, they'd have to either shutdown all the cards or take the PLCC in-house and shutdown the MasterCard.

Cheers,
Doug

April 3, 2015
11:44 am
Loonie
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I'm not sure if it's still the case but Amex used to have two types of cards in Canada, simultaneously. One is the credit card, with which we are all familiar, of which there are several models. The other was the "charge card", I believe, which provided good cash advances anywhere in the world and was not a "credit card" per se. I believe there was a provision that it had to be paid off in full monthly but can't remember precisely. It had no predetermined limit. TI am not sure if it still exists but it was a significant part of their market. A lot of people who travelled a lot internationally for business liked it because it didn't have a pre-set limit.

With regards to RBC, I am inclined to think Doug is right, and would go further. RBC may not be particularly interested in retaining a market segment that, in general, may be predominantly people with lower incomes and creditworthiness, especially with our economy in so much peril at the moment. If you want another card with them, they'll consider the application, but on a case-by-case basis.

In addition, I think there is now a law against sending out unsolicited credit cards, is there not?

I too think there will be some conflation between Shoppers and PC. I expect that not only the credit cards will come down to one, but that Optimum and PCPoints will merge. Maybe they'll call them "PC Optimum" points, as "PC" doesn't communicate very much on its own. There's no need for them to patronize a competitor bank.

April 3, 2015
8:35 pm
kanaka
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Doug said

kanaka said

I would imagine most will pay off and move one. Here is the reason why I say.

I used to have an Amex Costco card and we all know that Costco abandoned Amex and went with MasterCard. Amex sent us letters saying what they were going to do as their attempt to keep us as Amex customers. They mailed their new Simply Cash Amex cards with the same account number as the Costco card. You would be able to use the new card as soon as received, at Costco til the cutoff date. We received the new cards and never called into comfirm receipt of them just to see if they would follow up to see if they would contact us to confirm if we had received them in the mail and/or what our intentions were. NOTHING HAPPENED! So when I checked online they still showed and with a 7000 credit limit, so since I had cut them up I thought is should cancel them as the 7000 is still a liability as far as a credit check goes. I contacted them by secure email and they asked why it was that we no longer required them. I decided that I was not going to explain our process in the need or selection for a credit card nor was I going to succumb to shopping at Costco with their "preferred" card and have me jump through hoops every 5 years when they decide to make a change. Amex also made me an offer of a period of time (12 months?) of interest free along with wanting to hear why my decision would be to cancel the card. In my second email I asked them to cancel the card and they said they would pass my request on. I had no idea my card was cancelled until I checked online.

Amex customer service is very good. Their decision to create Simply Cash and retain the customer base seems to have been a failure as they have also been doing a bit of TV advertising for the card as well.....assuming it is not doing well.

I think most of us have credit cards for our preferred needs and as Costco went to MasterCard we have always had Air Miles MasterCard and we also have 2 Amex Air Miles cards.....so no need for any thing else. I know what we made on the Amex Costco card in a year and will see what Air Miles makes in a year before we make any decision for a new credit card.

And Costco USA is going to Visa?

I think RBC is being cations after seeing how the Amex Simply Cash has failed?

That's correct about Costco in the U.S. (and globally, excluding Canada) switching to VISA and going with Citibank, N.A., beginning early 2016, to offer the Costco VISA. Capital One Canada is offering the Costco Canada MasterCard.

Combine this with American Express loss in a recent antitrust lawsuit over payments and merchant services, a declining travellers' and gift cheque business and they are, quite likely, going to end up a niche business a la Western Union. The next shoe to drop will be - will Buffett sell his shares? As well, with AMEX, you can't get a cash advance to save your life - so much for emergency encashment assistance if travelling worldwide. :(

I'm a value investor and used to like American Express but even I have been burned by declining businesses (i.e., Yellow Pages Group Co.) and would rate them a "sell". VISA and MasterCard are simply "holds" - I'd love to buy them but can't stomach the premium I'd have to pay (not buying VISA and Google at their IPOs, thinking they were "expensive," were my worst examples of indecisiveness).

And...in the "still to come," besides RBC likely losing the Shoppers Optimum business, Sears Financial is now almost 5 months into a 12 month countdown to the shutdown of their MasterCard and private-label credit card business. If they can't get a buyer, they'd have to either shutdown all the cards or take the PLCC in-house and shutdown the MasterCard.

Cheers,
Doug

Doug what does PLCC mean?

I worked for Sears for 40 years and I know they should have never sold off the in house credit operation as it was very beneficial to their bottom line. Even though I have not been there for awhile I still think I know how "they" think. And my hunch is a bit different. They are pushing the MasterCard hard at the store level even though the countdown is on. I am thinking there might be a threshold number of new MasterCard accounts to attain for the countdown to stop and perhaps Sears will drop the Sears card and only have the Sears MasterCard.

April 4, 2015
7:52 am
Doug
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kanaka, PLCC=private-label credit card.

Didn't know you worked for Sears Canada - and for forty years to boot! What did you do there?

Anyway, call mine a "hunch" and you're right about the credit card operation once being important to Sears. Over 10 years ago, JPMorganChase paid a huge premium to acquire the whole credit card portfolio operation (and chartered bank Sears Canada Bank, renaming it JPMorganChase Canada Bank) because Sears was then doing even better than HBC (in terms of profiitability). Fast forward to now and the tables have turned. They've sold off their most profitable, flagship stores and are left with basically less than 100 department stores in middle- and small-markets in Canada experiencing huge rodent problems, cracked ceiling and floor tiles and carpets that are 25+ years old. Apparel merchandise, in men's anyway, costs of polyester pants under the "Arnold Palmer" label more suited to my grandfather than me. I'm not being a snob but basically, it's of inferior quality and the prices are way over-priced compared to what you could get at even a Tip Top Tailors, Moores or Le Chateau. Basically, I don't mind polyester dress pants but at least make them fit right and don't charge $50-75 for them for a label that's so passe it's not even funny. Wal-Mart's "George" brand sells pants of an equal (or better) quality than "Arnold Palmer" for almost half the price.

Sears could be a good thing - they're just desperately starved for cash - but they need an owner willing to spend to rebrand the stores (dropping Sears, now that it's basically separate from Sears Holdings, and renaming it either Eatons or Simpson's, both of which they own internally) and remerchandise the doors. Stop selling low-margin electronics (TVs, sound systems, etc.) effective immediately. Move the Kenmore and Craftsman brands into the separate Sears Home company-owned and franchisee-owned owned Hometown stores and basically make these new Sears stores sell only quality apparel, shoes, housewares and bedding under better labels. Donate all "Arnold Palmer" merchandise to various thrift stores across the country. It's still good merchandise and someone will find value in it, at the $3 price point. :)

Anyway, I digress. The credit card operation-JPMorganChase waited until the last day they could before the mandated one-year notice period they're ending their relationship (at the end of October 2015) shows me that their Sears credit card operation (the biggest part of the operation, bigger than Best Buy/Future Shop and that got sold to Desjardins) has fallen off a cliff. I suspect, knowing what I've seen in terms of cardhoilders making repayments at the bank I worked at, most of their credit cardholders were of the Sears department store card variety. The MasterCard was "ho hum" in terms of 1% rewards (in the form of Sears gift cards) and the no foreign currency charges was appealing but that's ending in October when it's either shutdown or sold. Any new buyer won't likely offer this. People aren't doing general merchandise spending on department store branded Visas and MasterCards - that's why you're seeing everybody pare their store-branded Visas and MasterCards. People are consolidating their spending on fewer credit cards, not more. So, that makes the Sears PLCC portfolio the only attractive part of the business as the buyer(s) will be reluctant to pay the high fees to MasterCard/Visa for a small, declining business when they convert them to Sears PLCC cards. Likely buyers are CitiFinancial Canada (only offers PLCC cards, having sold its MasterCard portfolio to CIBC four years ago) and Desjardins (the latter being less likely as it is busy digesting and integrating the Best Buy/Future Shop PLCC portfolio and somewhat "blindsided" by Best Buy Canada's closure of the Future Shop brand after they started sending new Future Shop-branded cards to clients). TD Retail Financing Services is a possible buyer but, again, they only offer PLCC services, not Visa or MasterCard, and TD's MBNA division is paring back (not adding to) its cards portfolio so I don't see them as likely. However, TD Retail F.S. hasn't done an acquisition since 2013 when it bought HSBC's PLCC portfolio.

Capital One Canada is a "possible" buyer, but only if Sears is really desperate to hang onto its credit card business (it's likely a tenth as big as it was 10 years ago, a 90% decline in its business, I suspect) and only if Capital One wants it. We'll likely know the buyer by May or July, to allow for a portfolio transition, otherwise I suspect a wind-up of the entire Sears card porfolio.

Cheers,
Doug

April 4, 2015
2:43 pm
kanaka
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I worked in various management positions on the Logistics side of the business.

I hear what you are saying and hope the CEO gets to fulfill his thoughts on how to change the quality of merchandise.

Sears Canada does not have to change name if sold, legally.

April 6, 2015
11:04 am
Doug
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kanaka said

I worked in various management positions on the Logistics side of the business.

I hear what you are saying and hope the CEO gets to fulfill his thoughts on how to change the quality of merchandise.

Sears Canada does not have to change name if sold, legally.

Umm, actually, not quite right. At some point, they transferred the trademark ownership up to the Sears Holdings Corp level and licensed them back to Sears Canada. In 2013 or 2014 (thinking 2014), Sears Canada quietly put out a press release announcing they've extended that licensing agreement to 2018 (where they pay no fees to use the name). Sears Holdings may either extend that agreement, they may extend it upon the payment of substantial fees or they may ultimately decide, now that the business is legally independent (Sears Holdings owns less 10-15% of Sears Canada, down from 90+% 8-10 years ago), want them to transition to a new name. Eaton's and Simpson's are owned by an unknown numbered company, which could be a separate subsidiary of Sears Holdings or it could be a subsidiary of Sears Canada. That aforementioned agreement also requires a name change if Sears Holdings sells its remaining shares.

Eddie Lampert (who is now the direct controlling shareholder of Sears Canada, not Sears Holdings), his private holding company ESL Investments and the hedge funds he manages have basically destroyed any remaining value to the Sears brand in Canada after a decade of store neglect (mice now run rampant in their remaining stores and they sell outmoded, polyester "Arnold Palmer" brand men's clothing at exorbitant pricing!). Sears Canada once did better than Sears U.S. in terms of sales...not anymore! Canadians are fed up with that brand - their only "value," where they provide decent service is in them standing by their furniture and appliance warranties. Craftsman tools and gardening equipment is decent but should shift to their dealer-owned Hometown stores and/or online/catalogue exclusively. In apparel, shoes and home goods, they are done. Electronics is low-margin and they should exit that business forthwith.

The sale has already happened. We're just waiting for Sears Holdings to sell their remaining shares in a secondary offering, likely later this year, the next time they are starved for cash. Sears Canada's only chance at success is a rebranding and name change. That opportunity still exists, as Target exits Canada, but it's closing fast.

Their other option is, ultimately, a full liquidation and sale of their remaining company-owned stores either back to the landlords to re-tenant/break-up into smaller stores or sale of various store leases directly to a retailer that is growing and doing well (i.e., TJX Companies Inc or Gap Inc).

Cheers,
Doug

April 7, 2015
4:12 pm
GS1
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Doug said

I'm curious how you got the "614th and 615th" credit cards? Are you simply taking the last four digits of the card?

Our cards were numbered xxxx xx00 0000 614x and xxxx xx00 0000 615x where the first 6 digits identify the Issuer and type of card and the last digit is a check digit. I make the assumption we were 614/615 but they could have started numbering at 100 or 500 for all I know.

GS

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