With new credit card, BMO shows it's not just playing defence

April 8, 2008
It's easy to forget amid all the dismal headlines about banks these days that they still run a very lucrative business providing financial services to Canadians.
Certainly, the banks are preoccupied about their exposure to U.S. real estate and the impact a slowing economy will have on their loan portfolios. But they're also stoking the furnace that generates an ever-reliable stream of revenue from people like you and me.
This brings us to some important new developments in the highly competitive area of travel reward credit cards. Bank of Montreal has made a bold move for market share by making big cuts in the number of points you need to travel, while several other banks have introduced an elite new Visa card with perks for big-time spenders and travellers.
BMO's newly revamped Mosaik Gold Air Miles MasterCard offers what in some situations is the most efficient way to generate reward flights in the Canadian market right now. Card holders can book flights using the Air Miles program with 20 per cent fewer points than regular members. Example: Card holders need 840 points for an off-season Toronto-New York flight, down from the standard 1,050.

The Mosaik Gold MasterCard gives you one Air Miles point for every $15 you spend, which means you can get that Toronto-New York flight by spending $12,600. If you fly during high season - the regular requirement of 1,300 points would be discounted to 1,040 - then you'd have to spend $15,600.
BMO's competition includes Royal Bank of Canada's Visa Platinum Avion, Canadian Imperial Bank of Commerce's Aerogold and AeroplanPlus from American Express. The rules for these cards differ, but you generally have to spend at least $15,000 for a short-haul flight through the Aeroplan program.
An Aeroplan drawback is the limited availability of "classic" flights, which cost the lowest number of points. Once they're gone, you have to use up considerably more points for a "classicplus" flight.
BMO's re-jigged Mosaik card removes some benefits that used to be offered through a special arrangement with the airline WestJet. However, the new 20-per-cent discount will benefit more people because 11 airlines can now be used for reward flights, including WestJet. The 20-per-cent discount applies across the board to normal Air Miles requirements and BMO says there are no blackout periods or other restrictions.
The new BMO card hits the market at a time when other banks have been updating their travel reward card offerings. For example, Toronto-Dominion Bank's TD Canada Trust division now allows clients to apply points toward trips booked anywhere they want, including travel websites. Previously, you had to use TD's travel centre. American Express introduced a similar card yesterday called Blue Sky (more details on these cards in a future column).
TD, Bank of Nova Scotia, CIBC and RBC are among the banks that have introduced a new Visa card category called Infinite, which is aimed at people who spend heavily on their cards and travel a lot. RBC is reserving its Visa Infinite card to private banking clients, while others are creating Infinite versions of their current travel cards.
CIBC's Aerogold and Aventura Infinite cards will come with a higher credit limit, typically $20,000 to start (compared to a more usual $5,000), and they're typical in offering what's being called extra purchasing power. This means you can go above your card limit with a purchase without fear of a transaction being declined and without racking up a $20 over-limit fee. As soon as you get your next statement, you're required to get your balance down below your limit. Another Infinite upgrade is to include limited travel medical insurance and trip cancellation insurance.
One area where BMO has it over the competition is in providing customers opportunities to build their travel reward point totals through ways other than spending on credit cards. If you have a BMO bank account, you get one point for every $40 in debit transactions. You can also get the monthly total number of Air Miles you earn on your credit card increased by 10 to 30 per cent if you have one to three additional BMO products, say a mortgage, line of credit or chequing account.
Helping customers add points through ways other than charging items on a credit card seems to be a trend. In February, American Express introduced the new Air Miles Platinum that offers 50 per cent more points when the card is used at various Air Miles sponsors. CIBC Aerogold currently offers a 50-per-cent point bonus on spending done at select gas stations, grocery stores and drugstores.
The troubles the banks are having today mean they're not as generous as they were a year ago in offering rock-bottom interest rates on mortgages and loans. The latest developments in credit cards tell us the banks still know how to play offence as well as defence.
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BMO's new MasterCard
What's New: A 20-per-cent discount on the usual number of points required for reward flights under the Air Miles program
Choice of Airlines: 11 serving more than 500 destinations
Points: One for every $15 in spending (two points for every $15 spent at Shell gas stations)
Annual fee: $90
Car rental insurance:
$29 extra annually
Other insurance: $99 extra annual cost for travel medical coverage and other insurance
Bonus points:
150 for signing up