With the recent announcement of a deal on lower credit card fees, we thought it would be the perfect time to cover another contentious issue: what customers should do if their lender introduces credit card agreement changes. I know about this firsthand – I recently received disclosure documents for my MBNA Smart Cash MasterCard.
Although disclosure documents sometimes seem like they’re written by a team of lawyers, it’s still important to read them. Here’s how to decipher what seems like a lot of legal mumbo jumbo, and understand your rights.
What Your Credit Card Lender Needs to Tell You
If a credit card issuer changes any features or any of the terms or conditions of one of their credit cards (including reward structures and earning rates), the issuer has to give consumers the details of these changes in writing at least 30 days before the changes go into effect, says Natasha Nystrom, Media Relations Officer at the Financial Consumer Agency of Canada. “Credit card issuers may provide this information to consumers in writing, or electronically if the consumer consents to receive required information in electronic format rather than as paper documents,” she states in an email to MoneyWise.
That being said, there are some changes to terms and conditions for which advance notice is not required. However, the changes have to be disclosed to consumers in the next statement they receive after the change is made. These changes are:
- an extension of their grace period
- a decrease in the interest rate
- a decrease in a charge that is not related to the interest rate
- a decrease in their credit limit
- a change to any optional service you accepted
- if you have a card with a variable interest rate, the change in the benchmark rate or base rate to which it is linked (also known as the reference rate).
I’ve Received Notice My Card is Changing. What Do I Do?
Consumers need to note whether the things they like about their card – such as a great rewards earning rate or low annual fee – are changing, and whether there are any changes to their interest rate or any promotional features. “Consumers that have been alerted that a change is coming should ensure they understand the change and – as is the case with any new credit card – the credit card payment terms,” says Nystrom. “They should understand the change’s potential impact on the card’s interest-free grace period, interest calculations, minimum monthly payments, etc.”
Can a Loyal Customer Negotiate New Terms?
Maybe – but it’ll be on a case-by-case basis. “Consumers can contact their financial institution to determine if the terms can be negotiated,” Nystrom says. If a credit card no longer meets your needs, it’s important to let your lender know and see if they can offer a solution to retain your business. No luck? Well, a credit card shakeup doesn’t have to be bad news – it’s a good time for customers to shop around and compare their options from other lenders.
BONUS TIP: Do you know how your current credit card stacks up to others like it? Find out – and see how much you could save or earn – with RateSupermarket.ca’s new ultimate Credit Card Rewards Calculator.
Will Banks Change Up Their Credit Cards Due to the Interchange Fee Cut?
Credit card history was announced recently as MasterCard and Visa agreed to reduce credit card processing fees for merchants. It means store owners will save money – but could eat into the banks’ bottom lines. Could they respond by changing up existing credit card rewards, or by introducing new fees? “I think this is a better alternative than allowing businesses to implement a surcharge for credit card transactions, however there is no guarantee that consumers will ultimately benefit from lower merchant fees,” says Robb Engen, former personal finance columnist for the Toronto Star and one half of the popular Boomer & Echo blog. “Banks and credit card issuers will lose at first, as they’ll collect less revenue per transaction. Businesses win because they’ll pocket the savings.”
Engen adds that consumers won’t see a difference in retail prices – so there’s no net benefit to them – and that he believes change is coming for existing cardholders. “… the banks and credit card issuers will almost certainly start to devalue the rewards paid out on their favourite rewards credit cards, meaning consumers will ultimately lose in the end.”