Banks are looking for ways to boost credit revenue as Canadians cut back on high-interest borrowing
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Canadian Imperial Bank of Commerce and big box retailer Costco launched a long-term agreement that makes CIBC the exclusive issuer of Costco Mastercards in Canada.
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In the deal announced on Thursday, CIBC also takes over the existing Canadian Costco credit card portfolio, with more than $3 billion in outstanding balances. The move comes as the Big Six banks search for additional sources of revenue to bolster low income from credit cards balances as the COVID-19 pandemic weighs on consumer borrowing.
Retail giant Costco operates 813 warehouses globally and 105 across Canada. The program is expected to start next year.
The pandemic has put pressure on consumer spending habits. People tucked away cash while confined to their homes and avoided taking on debt through personal loans, including credit cards.
Meanwhile, consumers have turned to new forms of payments programs that offer more flexibility, including buy now pay later services that allow shoppers to split their payments on purchases into smaller instalments over a set period of time. CIBC introduced its own payment instalment product last year, which charges lower interest rates than most credit cards.
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The deal allows CIBC to “diversify our credit card portfolio in everyday rewards, grow our market share in payments,” group head of personal and business banking Laura Dottori-Attanasio said in a statement.
U.S. lender Capital One, which is the current issuer of the Costco-branded credit card, is ending its partnership with the retailer. Existing cardholders can continue to use their Capital One card until they receive their new CIBC card in early 2022. The bank said it will announce more details about the program in the next few months.
The bank did not disclose the financial terms of the deal.
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2021-09-02 12:25:25Z
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