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Banks can now offer both Visa and MasterCard

In the past, Visa cards were never truly everywhere you wanted to be, especially if you were applying for them through your bank. They, like all credit cards in Canada, were brand exclusives split between major financial institutions across the country -- some had Visa, some had MasterCard, but none had both.

It started with a Canadian Competition Bureau ruling 10 years ago, which forced banks to choose the one credit card they would issue. Back then, credit companies were governed by associations whose membership comprised of those same banks.

"Our concern at the time was if you allowed a bank to issue both Visa and MasterCard, the particular bank would become a member of both associations, and you'd have the same members governing the decisions of two supposedly competing card companies," says senior competition law officer Gregg Erwin.

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But in the past few years, the credit card networks restructured their governance -- MasterCard began restructuring in 2006, and Visa did it in November 2008. "Instead of an association of members, (credit card companies are now) standalone, widely held, corporations. Now banks only own a minuscule part of Visa and MasterCard; they don't have control of the day-to-day operations of either company," says Erwin.

That means the bureau will no longer take action against a bank that decides to issue more than one brand of credit card. And that means Canadians will soon enjoy a much more competitive credit card marketplace.

Benefits for banks and consumers
The banks' reduced governing power means the possibility of collusion with credit card companies to raise and lower interest rates artificially is greatly reduced. Plus, new credit processing technology means market dominance is virtually impossible.

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-- Posted: Feb. 16, 2009
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