CIBC Reaches Agreement to Take Over Costco Credit Card Business in Canada

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Banks Look For Ways To Increase Credit Income As Canadians Cut Back On High Interest Borrowing

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Canadian Imperial Bank of Commerce and big box retailer Costco have launched a long-term agreement that makes CIBC the exclusive issuer of Costco Mastercard cards in Canada.

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In the deal announced Thursday, CIBC also takes over the Canadian Costco credit card portfolio, with overdue balances of more than $ 3 billion. The move comes as the Big Six banks seek additional sources of revenue to bolster low income from credit card balances as the COVID-19 pandemic weighs on consumer borrowing.

Retail giant Costco operates 813 warehouses worldwide and 105 in Canada. The program is expected to start next year.

The pandemic has put pressure on the consumption habits of consumers. People hid money while confined to their homes and avoided getting into debt with personal loans, including credit cards.

Meanwhile, consumers have turned to new forms of payment programs that offer more flexibility, including Buy-It-Now and Pay-On Services that allow buyers to split their payments on purchases into smaller installments over. a defined period of time. CIBC launched its own installment payment product last year, which charges lower interest rates than most credit cards.

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The deal allows CIBC to “diversify our portfolio of credit cards into daily rewards, increase our share of the payments market,” said personal and commercial banking group leader Laura Dottori-Attanasio 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 coming months.

The bank did not disclose the financial terms of the deal.

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