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RBC new fee schedule and cash back Visa
March 13, 2015
6:16 pm
JustMe
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For those having account(s) at RBC, you have to be aware of new fee schedule coming into force as on June 1, 2015.
I refuse to pay banking fees, period.
Not to go into details, if you have 3 RBC products (chequing, credit card, investment) fee on chequing account used to be waived. As of June, you will be forced to use your Visa at least once in 90 days and it looks like your investment account has to be active - you will have to add $ to it on a regular basis or you will not satisfy condition for fee reimbursement. I will clarify that in person next week.

As for the cash back Visa, RBC has one with 2% cash back on groceries/purchases made at the grocery store. They have a list of eligible grocery stores and Walmart Superstore is there. Now, it is not clear are they are going to separate butter, bread, milk - eligible for 2%, panties, condoms, screws - no, only 0.5%. Very unclear and will have to clarify that too as they mention only 'store' and not merchandise you buy. If anybody knows the answer at the RBC.

Oh, I would like to see their faces if I have to say ' Sorry, I am not going to pay you 1c for a fee and I will transfer all my $ to somewhere else'.

March 13, 2015
7:21 pm
NorthernRaven
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"Active investment" is defined as "investment account with a minimum balance of $500 at market value on the last business day of your Monthly Cycle..." or with a preauthorized contribution set up. So it is really a $500 minimum balance, or something smaller that is building up with regular contributions. Not a big commitment.

It would be worth checking if pre-authorized payments are a purchase for the "active credit card" - you could simply have a monthly bill (cable, phone, etc) set up to charge to the card and not have to worry. Again, not a big deal.

The main problem is that it looks like the $10.95 "No Limit" account, which the MultiProduct Rebate used to waive completely, now only waives $5, leaving a $5.95 fee? This may send some people fleeing. They did bump up the rebates for the higher accounts a bit, though.

As far as I know, whatever merchant category code a particular Walmart is coded for by Visa is for all purchases, so if it is showing as a grocery store (code 5411, I think), all purchases there go to that code. I don't think a Visa transaction contains any breakdowns to multiple codes?
Then again, if a Supercentre with groceries was coded 5411 and you bought a snowblower, it would get the 2%, which seems like a leakage Visa might want to avoid.

March 13, 2015
7:45 pm
Norman1
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Some details are at Royal Bank: Service fee and account changes.

Their MultiProduct Rebate program will require the credit card product and the investment product to be "active" as follows:

* Active credit card means:

  • Credit card with an annual fee or
  • No-annual-fee credit card with at least one transaction (purchase, balance transfer, cash advance or interest charged to the account) in the last 90 days

** Active investment means:

  • Investment account with a minimum balance of $500 at market value on the last business day of your Monthly Cycle or
  • Pre-authorized contribution plan set up to the investment account
March 14, 2015
6:53 am
Loonie
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On the subject of which purchases may qualify as "grocery", I did a little hunting around on this a while ago.

My conclusion was that both MC and Visa use a 4-digit code system to identify the category into which the store falls. They all seem to use the same system, certainly within all Visa accounts, no matter what bank issues the card. I think that MC is the same.

The key issue is in the coding, not what you buy. 5411 is the code for grocery stores, so if it has that code, no matter what you buy, it counts as grocery. 5541 is gas stations. 5542 is automatic fuel dispensers. 5192 is Pharmacy. It's possible that pharmacies within larager stores have separate coding if they bill under their own label, but I don't know this.

I have been wondering how MC codes Costco, as it could make a big difference to some people if it is coded as grocery.

I found that it's quite difficult to get the info about which stores have which codes assigned. People in the stores don't seem to know. Trial and error may be the answer.

March 14, 2015
7:36 am
JustMe
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Amazing response! Thank you. All of that I found out but still have to clarify 'active investment' as I will not be doing any contribution in a future.

Here is a list of participating stores coded as MCC 5411. LIttle bit longer list, but it might help somebody.
Participating merchants* where you can earn 2% cash back on grocery store purchases† when you pay with your RBC® Cash Back MasterCard‡ card.
Grocery Stores and Supermarkets (MCC 5411)
Asian Food Center
Askew's Foods
Atlantic Wholesalers
Bidgoods
Brunos Fine Foods
Buy Low Foods
Canada Safeway
Choices Market
Colemans Food Centre
Community Natural Foods
CO-OP
Cooper's Foods
Country Grocer
Dominion
Extra Foods
Fairway Market
Farm Boy
Food Basics
Foodland
Fortinos
Grocery Gateway
Hannam Supermarket
Highland Farms
IGA
Kin's Farm Market
Les Aliments M&M
Loblaws
Longo's
M & M Meat Shops
Maxi
Metro
Michael - Angelo's Market
Moncion Grocers
Nester's Market
No Frills
Overwaitea Food
Pete's Frootique
Planet Organic
Price Chopper
Price Smart
Produce Depot
Provigo
Quality Foods
Quality Market
Rabba
Real Canadian Super Stores
Save Easy
Save On Foods
Shop Easy Foods
Shop 'N Save
Sobeys
Starsky Foods
Stongs Markets
Super C
Super Valu
Supermarché P A
Superstore
T & T Supermarket
Thrifty Foods
Urban Fare
Valumart
Village Food Markets
Wal-Mart Superstores
Weston Produce
Your Independent Grocers
Zehrs

March 14, 2015
11:56 pm
Norman1
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Merchant Category Codes (MCC) do seem to be common across all credit cards. The Internal Revenue Service uses them as well!

The IRS has a list at Merchant Category Codes to Determine Reportable Payment Card Transactions.

The online site of President's Choice Financial MasterCard shows the merchant category of each transaction. The MCC is not shown. But, the merchant category shown seems to match what's in the Merchant Category column of the table on the IRS site.

Costco transactions have the merchant category "WHOLESALE CLUBS" which matches what's in the Merchant Category column for 5300.

March 15, 2015
3:53 am
Loonie
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Great research, Norman! Thanks.

The IRS site, while helpful, does not tell us precisely which merchants go into which codes. It leaves us to figure it out. The coding for a number of retailers will be a matter of interpretation, and not readily available to the public.

A list from Scotiabank has Costco Gas listed under gasoline, so there appears to be some leeway in interpretation. This list had to do with Amex, but I agree that the codes seem to be universal, at least as far as I can see (which is not very far!). It's the application that is the problem. http://dr.scotiabank.com/ca/en.....t_2012.pdf

Section 4.03 (IRS) states "Merchant Category Code. A Merchant Category Code (MCC) is a classification code that is assigned by a payment card organization to a merchant/payee. The payment card organization assigns the merchant a particular code based on the predominant business activity of the merchant." I am not entirely clear what is a "payment card organization", even after reading the definition, but I presume it would be Visa/MC/Amex themselves. In any event, this seems to suggest that somebody somewhere outside of govt makes the assignment based on their opinion of the nature of the business.

March 15, 2015
10:23 am
Norman1
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Looks like the MCC is assigned by the acquiring financial institution that the merchants deals directly with and not necessarily MasterCard, Visa, or American Express. This is from Visa USA's booklet Visa Commercial Solutions: Merchant Category Codes for IRS Form 1099-MISC Reporting:

1. What is a Merchant Category Code?

A Merchant Category Code (MCC) is a four-digit number used by the bankcard industry to classify suppliers into market segments. There are approximately 600 MCCs that denote various types of business (e.g., 5111 Office Supplies, 7299 Dog Grooming Services, 5722 Household Appliance Stores).

2. How is the MCC assigned?

The MCC is assigned by the Acquiring financial institution when a supplier first begins accepting Visa payment cards. The MCC is assigned based on the supplier’s primary line of business. For example, if a supplier primarily sells computers, it may be assigned MCC 5732 “Computer Hardware”. If a supplier primarily repairs computers, it may be assigned MCC 7379 “Computer Maintenance, Repair, and Services”.

March 15, 2015
10:39 am
Norman1
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Loonie said
...

A list from Scotiabank has Costco Gas listed under gasoline, so there appears to be some leeway in interpretation. This list had to do with Amex, but I agree that the codes seem to be universal, at least as far as I can see (which is not very far!). It's the application that is the problem. http://dr.scotiabank.com/ca/en.....t_2012.pdf
...

I think the MCC of a transaction can vary depending on the credit card terminal used at a merchant's location.

Some charges at one gas station are merchant category "SERVICE STATIONS" (MCC 5541). Others at the same gas station are category "AUTOMATED FUEL DISPENSERS" (MCC 5542). Merchant name and address are the same in all cases. Looks like pay-at-the-pump is 5542 while going inside and paying at the cashier is 5541.

The Wal-Mart transactions I've seen are actually category "DISCOUNT STORES" (5310). It may only be transactions at the Wal-Mart Superstores that are 5411 for "GROCERY STORES, SUPERMARKETS".

March 15, 2015
5:50 pm
Loonie
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Yes, it is my understanding too that Walmart Superstores are coded differently than ordinary Walmarts.

Apart from that, I remain vague on all the other aspects. I really don't know what an "acquiring financial institution" is. Is it a bank? a credit card company? some kind of intermediary that processes payments? I don't know.

I think there is consistency on the application of the codes somehow but still not sure how it happens.

March 16, 2015
5:07 pm
Norman1
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The acquiring financial institution is who the merchant submits the credit card transactions to for processing and clearing. The acquirer then advances money to the merchant against those transactions.

The acquirer can be a bank. It can also be a company like Moneris.

Wikipedia article Acquiring bank has some details.

March 16, 2015
5:47 pm
Loonie
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Thanks, Norman. I see what you're saying, sort of.

I will call them clearing houses, as that makes more sense to me. So, if each clearing house gets to make its own interpretation of codes in terms of applying them, how is it that they seem to all turn out the same, as far as we can tell? I can see where there could be room for more than one opinion on what was the primary business of a company.
Or ARE they all the same? This is the question.

March 16, 2015
5:50 pm
Norman1
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I don't know how stringent the acquiring financial institutions are with MCC assignment.

Broadly, it is fairly easy. A restaurant probably won't be able to convince their acquirer to assign them MCC 8043 (Opticians, Eyeglasses). But, some categories seem close, like these:

  • 5812 (Eating Places, Restaurants)
  • 5813 (Drinking Places)
  • 5814 (Fast Food Restaurants)

I wonder how would they would decide between 5812 to 5814 for a restaurant.

Similar situation with these:

  • 5942 (Book Stores)
  • 5192 (Books, Periodicals, and Newspapers)
  • 5994 (News Dealers and Newsstands)
March 16, 2015
6:33 pm
Loonie
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More importantly, perhaps, for those who hold the new Costco mastercards which give 3% return for "restaurants", would 5812 and 5814 both qualify? How about the restaurants that are located inside other stores such as Ikea, The Bay, Holt Renfrew, T&T, hotels, etc.?
Why do they have to make this so difficult to understand?

March 17, 2015
10:08 am
NorthernRaven
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Norman1 said

I don't know how stringent the acquiring financial institutions are with MCC assignment.

Broadly, it is fairly easy. A restaurant probably won't be able to convince their acquirer to assign them MCC 8043 (Opticians, Eyeglasses). But, some categories seem close, like these:

  • 5812 (Eating Places, Restaurants)
  • 5813 (Drinking Places)
  • 5814 (Fast Food Restaurants)

I wonder how would they would decide between 5812 to 5814 for a restaurant.

Similar situation with these:

  • 5942 (Book Stores)
  • 5192 (Books, Periodicals, and Newspapers)
  • 5994 (News Dealers and Newsstands)

These would seem to be fairly distinguishable, and a lot of the desire for classification probably is driven by fraud analysis needs. Even common sense can do a pretty good job of sorting "fast food" from table dining with wait-staff, higher bills and tips. "Drinking Places" would typically involve a liquor license (coffee shops would be "fast food").

Similarly, a "book store" is fairly distinguishable in size and revenue from published books from the "cigar store" type books/periodical shops or other non-bookstore vendors, and from kiosk-type "news stands" which are generally not separate premises.

Restaurants inside store would depend if they were a separate vendor or not. A McDonalds inside Walmart is just a McDonalds, while Ikea's restaurant is likely just part of Ikea (although some stores might have a third-party run a restaurant or other enterprise inside the space). It would depend on whether there is a separate merchant relationship with the card systems.

March 18, 2015
9:00 am
GS1
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I believe the MCC is also used for some level of fraud detection. I bought a furnace from a heating contractor who was associated with a gas station. I was able to use my MasterCard to pay for the installation -- and the card was declined. I called the bank as I had lots of credit room available and they looked at it and said it was declined as it was a transaction over $1000 and that didn't make sense for a gas station.

They told me to have the merchant call and give some code which would allow that transaction to go through.

So, 5812 (restaurant) would likely have a different level thresholds for transaction values than 5814 (fast food restaurant).

GS

March 18, 2015
4:30 pm
JustMe
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I believe I got all clarified with very nice banking adviser at RBC.

If you have (chequing account) AND (active investment - defined as investment >$500 OR having preuthorized contribution) AND (active credit card - you have to have at least one transaction within 90 days), then you are eligible for free chequing account - $4 will be reimbursed at every billing cycle. It looks like they increased 'free' debits for chequing from 10 to 12.

US$ account is still free with one withdrawal per billing cycle, after that US$3.

Same banker advised to switch my Esso Visa to cash-back Visa which I did. 2% cash back from grocery stores is good. As Walmart Superstore is defined as 'grocery store' you can buy ANYTHING there and still get 2% cash back. Not that bad as I do not know any other CC giving 2% money back. So far my favorite was Walmart master card...

March 18, 2015
8:50 pm
Norman1
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Glad to hear that everything is clear now!sf-smile

JustMe said
..
Same banker advised to switch my Esso Visa to cash-back Visa which I did. 2% cash back from grocery stores is good. As Walmart Superstore is defined as 'grocery store' you can buy ANYTHING there and still get 2% cash back. Not that bad as I do not know any other CC giving 2% money back. So far my favorite was Walmart master card...

The Royal Bank Cash Back MasterCard works out to be better only for those who have significantly more than 1/3 of their usage at MCC 5411 (Grocery Stores, Supermarkets) merchants that qualify for the 2% cash back rate. For everything else, the cash back rate is just ½%:

You will earn
i) $2.00 back for every $100.00 (2% Cash Back Credit) in Grocery Store Purchases you make, up to a maximum of $6,000 per Annual Period,
ii) $1.00 back for every $100.00 (1% Cash Back Credit) in Grocery Store Purchases you make in excess of $6,000 during an Annual Period, unlimited,
iii) $0.50 back for every $100.00 (0.5% Cash Back Credit) in Net Purchases you make (including pre-authorized bill payments), other than Grocery Store Purchases, up to a maximum of $6,000 per Annual Period, and
iv) $1.00 back for every $100.00 (1% Cash Back Credit) in Net Purchases you make (including pre-authorized bill payments), other than Grocery Store Purchases, in excess of $6,000 during an Annual Period, unlimited. Grocery Store Purchases are purchases made at merchants classified by MasterCard's "Merchant Category Code" as "grocery stores and supermarkets" (MCC 5411).

Otherwise, one is better using a card that gives 1% cash back for everything.

March 18, 2015
9:08 pm
Norman1
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Loonie said

More importantly, perhaps, for those who hold the new Costco mastercards which give 3% return for "restaurants", would 5812 and 5814 both qualify? How about the restaurants that are located inside other stores such as Ikea, The Bay, Holt Renfrew, T&T, hotels, etc.?
Why do they have to make this so difficult to understand?

I don't think they do it on purpose.

As NorthernRaven and GS suspect, MCC were probably set up for internal risk and fraud management. Someone in marketing saw that MCC can also be used to do a variable reward program.

Instead of "credit card with 1% cash back", one could say "credit card with up to 2% cash back" by giving 2% cash back on certain things and not highlight the ½% rate on everything else. Banks are good with what I call the tiered-rates game.

March 18, 2015
10:54 pm
Loonie
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The RBC MC Cash back card is better than the Esso Visa card though, as the latter gives significantly less than 1%, percentage - approx 0.6%, depending on how much you cash in at a time.

Also, although you can shop your heart out at WalMart Superstores, only the first $6,000/yr gives the 2% return; above that, it's only 1%.

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