Amex Canada Eliminates Minimum Income
Disclosure: Opinions expressed here are my own and not anyone else’s or those of the credit card companies. My opinions are based on my own analysis and in reality credit card companies may be pursuing these policies and procedures to achieve very different objectives.
American Express recently removed the minimum income requirement on all their cards, including high-end cards such as Amex Gold and Amex Platinum. Today, I will give my take on the reasons behind this decision and what it means for Visa and MasterCard.
Currently Visa’s elite series card, Visa Infinite, has a minimum annual income requirement of $60,000/00 personal and $100,000/00 household and MasterCard’s elite series card, World Elite, has a minimum income requirement of $80,000/00 personal and $150,000/00 household income. By establishing a higher minimum income requirement, Visa and MasterCard don’t want everyone or those with lower income to hold these elite series cards.
This is my understanding that the reasons behind this: merchants pay higher fees on elite series cards and by restricting these cards to only higher income groups Visa and MasterCard are trying to balance out the higher fees merchants pay because it is expected these groups will spend more than lower-income groups. However, in reality this may not be the case, as it is not necessarily true that high-end cardholders will spend more than regular card holders.
This is where Amex comes in. By targeting those left behind by Visa and MasterCard, they are grabbing a significant part of market share that will turn out positive for their business. American Express is mainly targeting those groups of people.
They are targeting young people who just joined the workforce, college/university students, and middle-aged to older people who want high-end credit cards. The main boost Amex will get will be from younger people who just joined the workforce and students, as these people will remain loyal to Amex in the latter years when their income goes up. Amex is not just looking at business today, but they are looking to grab market share from Visa and MasterCard for years to come.
It will be interesting to see what reactions this brings from Visa and MasterCard. They may decide to idle away and do nothing, watching American Express grab market share from them or they may take actions to lure these groups Amex is targeting by releasing innovative products or by lowering the minimum income on their elite series cards.