The Bankwatch

Tracking the consumer evolution of financial services

Canadian government intervention on Interchange and the impact on rewards

Had an interesting conversation today with an executive of a Credit Card issuer. The topic (one of many) was interchange in Canada. Apparently there is discussion about government regulation on interchange, as we have seen in Australia, and beginning in the US.

My facts are limited here, but something to watch for is the unintended impact. This quote from an earlier post referred back to the Globe and Mails comment that interchange essentially funded rewards programmes.

Interchange and how it is the next new problem for consumers in Canada « CommunityLend blog

Banks take in an “interchange” fee, which is a percentage of the purchase, each time a customer uses the card. It covers many of the banks’ costs, including any loyalty or points programs they offer.

Thinking this through… should the government limit interchange, the [one of the … ] unintended consequence will be reduction or elimination of rewards programmes associated with credit card purchases. What will that mean for CIBC Aerogold, and RBC rewards?

Any Canadian credit card issuer readers care to comment?

Written by Colin Henderson

July 30, 2008 at 22:45

Posted in Credit Cards, Payments

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