Why are American reward programs so generous?

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kelvSYC
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Location: San Bruno

Why are American reward programs so generous?

Postby kelvSYC » Wed Aug 07, 2013 3:20 am

I've been comparing American credit card reward programs and their Canadian counterparts, and it seems that American cards across the board have more generous reward programs overall. I'm wondering why that is in general - whether there's a tendency for US cardholders to spend more (or do stuff like carry a balance that makes the funding of generous rewards programs possible), whether it's just marketing to a bigger audience, or whether it's the more regulated marketplace in Canada.

In general, why is it that we have on this side of the border cards like the It and the Freedom, while in Canada, it's incredibly difficult to get a 1% card without eating an annual fee? (Sure, there's always MBNA's cards and RBC's Cash Back MC, but they still pale in comparison to American offerings...)
Current Credit Scores:
VantageScore 3.0 - 760 TU, 764 EX (11-19-16, Credit Karma)
FICO 8 - 747 EX (10-22-16, AmEx statement)
Discover - 750 TU (11-4-16, Discover statement)

Current Credit Cards:
RBC - $8000 CAD
BoA - $13500 USD
Capital One - $2750 USD
AmEx BCE - $4000 USD
Discover It - $8000 USD


Midori
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Location: TX

Postby Midori » Wed Aug 07, 2013 8:43 am

I noticed that when I was looking at the UK cards...

The US population is about 314 million. The Canadian population is about 34.5 million. The UK is about 62.75 million. So I'm sure that that pool-- plus the number of cards to be parceled out among that pool-- drives a certain degree of competition, plus a greater number of people who pay interest, carry balances, etc, to absorb the cost of the benefits for the responsible cardholders.

In the US, banks are chartered by states, so you've got a wider base to start with. Canada's banks are all federally centralized.

In the UK, I know some of their unattractive banking has the possibility of becoming even less attractive after some changes that are being proposed by the EU, so who knows.

Obi-dan
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Postby Obi-dan » Wed Aug 07, 2013 11:19 am

I worked for a retail bank and one of the guys in the international side told me that borrowing is just viewed differently outside the US. He said they look at is as leverage of an asset while we here see it as an extension of income or leverage not against an asset but as leverage against future income. Therefore we tend to extend credit to people without hard assets more than other countries. In turn the user tends to be sought after where as in other countries the lender would be sough after.

Given that premise I can see why our model lends itself to needing to sell your product and giving an incentive to the client (ie. generous rewards programs) above the mere ability lo leverage assets.

I hope that makes sense.
Cards:
Chase Sapphire Preferred
Marriott Rewards
Citi Hilton
Barclay Arrival
AMEX BCE (member since 95)
Chase Freedom
Discover It
Wells Fargo Platinum
Barclaycard (Apple)
Local Credit Union Visa (buy local!)


FICO Scores:
TU: 824 (Aug 2014)
Experian: 789 (Aug 2014)
Equifax: 807 (Aug 2014)

kelvSYC
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Location: San Bruno

Postby kelvSYC » Wed Aug 07, 2013 11:27 pm

It's kind of interesting if you think of it that way. According to Rate Supermarket, most of the best Canadian cards already require a personal income of $60K or a household income of $100K, in addition to excellent credit and ability to eat a significant annual fee.

Still, "leveraging against future income" doesn't make too much sense to me. It makes me feel like only those who have secure long-term employment or investments up the wazoo have the ability to borrow money (even if they have no ability to pay), while people who are well-off but coming to the US for the first time (eg. foreign students, international skilled workers) can't borrow anything (even if they have the ability to pay as soon as the transaction is posted). But I know little about this industry, I suppose...

(This is a deliberately gross overgeneralization; as you can see, I can borrow reasonably well but I'm not in either stable employment or having a large American investment portfolio)
Current Credit Scores:
VantageScore 3.0 - 760 TU, 764 EX (11-19-16, Credit Karma)
FICO 8 - 747 EX (10-22-16, AmEx statement)
Discover - 750 TU (11-4-16, Discover statement)

Current Credit Cards:
RBC - $8000 CAD
BoA - $13500 USD
Capital One - $2750 USD
AmEx BCE - $4000 USD
Discover It - $8000 USD

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Calipso
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Postby Calipso » Mon Aug 12, 2013 6:04 pm

Image
My Limits:
NFCU NavCheck: $15,000/NFCU Platinum: $11,500/NFCU nRewards: $8,000
Chase Freedom: $6,500/Chase Slate: $6,000/CSP: $5,000/Marriott Rewards Primier: $5,000/United MileagePlus Explorer: $5,000/Southwest Primier: $3,000
Citi Hilton HHonors: $9,700/Citi Simplicity: $8,200/Citi Forward: $5,500
AMEX Blue Cash Everyday: $8,000/SPG AMEX: $5,000/AMEX Everyday: $5,000/AMEX Delta Skymiles Platinum: $3,400
Discover IT: $7,700
Barclay's NFL Extra Points (Carolina Panthers): $5,000
DCU Platinum: $3,000
RTN FCU CC: $2,000
CCCU Platinum Rewards Visa: $2,000

Current total limit: $129,500

whit
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Posts: 508
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Location: ca

Postby whit » Tue Aug 13, 2013 10:11 pm

several factors, besides US (before, now not so much) being more flexible with its lending, Americans tend to spend and carry balances--which means the credit cards are very lucrative

also is Canadian merchants suing Canadian banks for high processing fees? think not

why did American banks stop offering cash back with debit cards? because the govt tighten regulations, frank/dodd, which makes it less lucrative for banks, so they no longer have surplus OR a reason to give back to its customers for using debit cards..

people don't seem to understand the cashback comes back at a price, usually of those who spend too much and not wisely, and if we are lucky they won't end up going bankrupt or welfare or another means of feeding off us who do pay all or at least all plus purchase interest,

and not only that, but merchants who get charged ingrains that into their product prices, along with overhead charges,

so either way you're really not getting cashback, you're roundabouts paying for your cashback, and since paying in cash won't make a difference, unless everyone reverts to cash, might as well take advantage of it



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