Mortgages and Canadian Tire Bucks | Who Can Lose?
Canadian Tire Corp. is my favorite store for power tools. I use my Canadian Tire bucks to pick the latest toys in the power tools category. But will consumers who are used to buying bicycles from Canadian Tire trust them with their mortgage.
Canadian Tire is Canada’s biggest retailer of auto parts and household goods. Canadian Tire announced that it will now allow customers in three test markets to combine their mortgage, chequing and savings accounts, as well as loans and credit card balances, into one account. Canadian Tire’s "One and Only" account has no setup or transaction fees and customers who use it will earn bonus Canadian Tire money, the company said. “Giddy up” the tool master said.
"Consumers are looking for value, they want to bank with someone they trust and they are looking for alternatives to traditional banks," said Pam Dodaro, associate vice-president of retail banking products at Canadian Tire Financial Services. She has a point. The success of the Capital One ads and the credit union ads that poke fun of the banks is an indication of the underlying dissatisfaction that consumers have with the banks. The trick is whether Canadian Tire will be able to satisfy consumers demands for financial services as well as they can for consumer goods such as power tools and bicycles.
Canadian Tire has been successful in attracting people to its Master Card. I know because I have one. They entered the market by extending the credit criteria to areas the conventional banks did not want to touch thus growing their consumer base. The attractiveness of the Canadian Tire money associated with the card makes it easy for it’s customers to redeem their Canadian Tire money. Simply whip out the Master Card and see how much you have on your account…easy peasy.
Canadian Tire acquired a banking licence in 2003. They have started offering high-interest savings accounts, conventional mortgages and guaranteed investment certificates in the two Ontario markets of Kitchener-Waterloo and London and Calgary.
The migration of retailers into financial services as competition has increased in the grocery, house wares and mass merchandising retail sectors.
Wal-Mart Canada Corp. hired the former vice-president of financial services for American Express Canada last year to assess its options for expanding into financial services sector. Industry sources predicted Wal-Mart, which has not applied for a banking licence, will likely branch into the segment through a third-party financial institution. Canadian Tire used the same method of getting banking expertise by poaching a senior American Express executive to kick start their entry into banking.
Another grocery retailer Loblaw Cos. has long held an official Canadian banking licence. It uses but uses its bank solely for running its credit card business. The grocery giant's PC Financial division offers banking products including no-fee accounts, lines of credit and mortgages, in partnership with the Canadian Imperial Bank of Commerce. My experience with uses of PC is that they find it cumbersome and without the benefits of being able to talk to customer service i.e. Face to face.
Canadians are extremely conservative in their use of banks in Canada. They want to be able to reach out and touch someone, especially when their money is on the line. The relationship of the consumer to the bank has eroded over the last twenty years. Bankers whose advice was sought have devolved to shills for mutual funds and LOC’s. If the new comers can provide the security in touch and consumer service they will definitely give the banks a run for their money and ours.
The role of the mortgage broker in BC is to outline the pitfalls that clients can avoid and in the process live happier and more prosperous lives.
Duncan Seward
A Mortgage Broker in BC
604-644-0826
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