Thursday, June 04, 2009

Invited back to MBNA

I got an unexpected letter from MBNA this week. They have offered me a Premier Rewards MasterCard. This card offers 1% cash back and 7.96% interest.

Funny because when I canceled my old card it was 19% interest and no rewards. So they are rewarding people who cancel by offering them a better deal to return. Maybe there's a strategy there for the existing customers.

It might sound like a good deal but it isn't really. I get 1% cashback already on my National Bank card so there's nothing there. Plus the National Bank card will upgrade to 2% for large monthly purchasers if I really was interested in getting purchase cashback.

And is 7.96% interest really a good deal? MBNA borrows from the central banks at 0.25%. So they are making about 750 bps profit. That seems excessive to me. I feel they are trying to get the good customers to cover their losses on defaults from irresponsible loans they made to irresponsible customers. No thanks.

Plus since I have no balance I don't care if the interest is 8% or 28%. It's still $0 to me. Paying interest on credit cards is for fools and suckers.

I wouldn't be surprised if in the not too distant future the credit card schemes become more quantized. There will be 4-6% interest, no fees, longer grace period, cashback and other incentives for the best customers. Shaky customers will see the legal max interest 20-30%, annual fees, legal minimum grace period, no incentives. They may even have to post capital and partially secure their credit limit balances. Say put up $500 cash in order to receive a $2000 card balance. Maybe a level in between at around 12-15% interest with annual fees.

Plus if MBNA really wanted my business they should try to demonstrate good customer service. After I canceled my MBNA card there was a credit made to the account by a vendor. On April 28 I phoned MBNA and asked them to mail me a cheque. They said it would be sent within 10 business days. The cheque still hasn't arrived and now I have to phone them again to try to extract my money. Why would I want to go back with these people? So thanks but no thanks MBNA.

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