Changes Coming to BMO Credit Cards in May 2021

Last year, BMO introduced their new travel and lifestyle credit cards: the BMO eclipse Visa Infinite* Card and the BMO eclipse Visa Infinite Privilege* Card, with high earning rates on popular categories.

Now, we’re beginning to see their ripple effect on the rest of BMO’s credit card portfolio, with an increase in the cost of redemptions with BMO Rewards as of May 5, 2021.

There are also upcoming changes to the earning structure for the BMO Air Miles World Elite Mastercard and the BMO CashBack World Elite Mastercard. As of the June 2021 statement, these cards will introduce elevated category earning rates on everyday spending, while reducing the base earn rate. 

Devaluation to BMO Rewards Redemptions

Let’s get the ugly part out of the way: BMO is devaluing their in-house BMO Rewards points on May 5, 2021. Currently, you can redeem BMO Rewards points for travel purchases at a rate of 140 points = $1. Starting May 5, the rate will increase to 150 points = $1.

With this change, the value of BMO Rewards points drops from a fixed value of 0.71 cents per point (cpp) to 0.67 cents per point – a 7% decrease.

There’s no silver lining here: a devaluation is a devaluation is a devaluation. This comes as quite a shock, so soon after the launch of the vaunted BMO eclipse Visa Infinite and BMO eclipse Visa Infinite Privilege cards.

To make up for this 7% decrease, BMO is offering a 7% one-time increase to your available BMO Rewards balance on May 5. This will ensure that you can redeem your existing points for the value you expected them to have when you earned them.

However, going forward, the cards will offer reduced effective earning rates:

• BMO eclipse Visa Infinite Privilege Card:
  • 3.33% return on groceries, gas, dining, drugstores, and travel (4.17% with a supplementary card)
  • 0.67% return on all other purchases (0.83% with a supplementary card)
• BMO eclipse Visa Infinite Card:
  • 3.33% on groceries, gas, dining, and transit (3.67% with a supplementary card)
  • 0.67% on all other purchases (0.73% with a supplementary card)
• BMO World Elite Mastercard:
  • 2% on travel, dining, and entertainment
  • 1.33% on all other purchases

It’s disappointing, and frankly quite unprecedented, for a bank to introduce new premium products, only to devalue them so quickly. While this isn’t a huge devaluation, it sends a terrible message.

If I were an existing or prospective BMO cardholder, I’d be less concerned about the size of the devaluation, and more concerned about the likelihood of another bait-and-switch.

For anyone who recently got the new BMO eclipse Visa cards, or anyone who’s still considering it, I’d recommend applying and reaching the minimum spend requirement as soon as possible. 

If the bonus points are in your account before May 5, they’ll retain their value after the 7% balance increase. However, if you open the card now but the statement which shows the bonus isn’t generated until after the devaluation, your bonus will be worth 7% less than what you expected.

Also, no matter when you opened the card, the anniversary component of the welcome bonus will be devalued. This is a real insult to early birds who eagerly applied when the cards launched in November 2020, expecting the full value of the promised bonus points.

The extra 15,000 points upon your cardholder anniversary won’t arrive until November 2021, at a devalued rate with no way to get your expected value for that chunk of points.

In addition to travel redemptions, you were also able to redeem BMO Rewards as funds into your BMO financial products at a rate of 150 points = $1. With this change to BMO Rewards, these two redemptions will now have equal value. 

While it’s nice to have multiple ways to use points for maximum value, it’s somewhat strange to see a product marketed as a travel card (in the case of the BMO eclipse Visa Infinite Privilege) offering equal value for a cash-like redemption.

BMO Air Miles World Elite: Partner Rewards Up, Lounge Access Down

Currently, the BMO Air Miles World Elite Mastercard has a flat earning rate at 1 Air Mile per $10 spent.

If you collect Cash Miles and redeem at the non-promotional rate of 95 Air Miles = $10, or 10.5 cents per Air Mile, you’d get a rate of 1.05% return on all spending.

Going forward, the card is reducing the base rate to 1 Air Mile per $12 spent. With this devaluation, you’ll earn 0.88% on everyday spending.

In parallel, the card is putting greater emphasis on its Air Miles partners. You’ll earn 3 Air Miles per $12 spent at participating partners, for a rate of 2.63% at specific merchants.

BMO advertises “3x the Miles on groceries, gas and more,” but this is a bit misleading. You won’t earn triple miles at all grocery stores and gas stations, only at select partner stores – those categories are just representative of a few of Air Miles’s flagship partners, namely Sobeys brands and Shell.

This is a win if you already shop at these stores, but a clear loss if you don’t. Logically, I do think it makes sense for co-branded cards to encourage tighter integration between cardholders and the loyalty program, as we’ve recently seen with the new Aeroplan cards offering more Air Canada benefits.

Also, while the card will continue to provide a LoungeKey membership for airport lounges, it will no longer offer two complimentary passes per year for lounge entry. Instead, you’ll have to pay US$32 per visit.

Lounge passes will remain on your account until the end of 2021. New applicants in June, after the earn rate changes take effect, will still be able to use the two lounge passes for 2021.

Fortunately, these changes won’t affect what I consider to be the card’s two biggest appeals: the welcome bonus and the generous award ticket insurance. I suspect that many cardholders who don’t often shop at Air Miles partners will continue to benefit from this card.

New applicants can currently earn 2,000 Air Miles upon spending $3,000, with the first year annual fee waived. This offer is available until October 31, 2021, and BMO often extends it, although it’s possible that this will change when the new earn rates go live.

BMO CashBack World Elite: Category Bonuses for Low Spenders

The BMO CashBack World Elite Mastercard is also shifting from a flat earning rate to a category-based model.

Currently, the card earns 1.5% cash back on all purchases. Going forward, the card will change to a 5-4-3-2-1 structure:

• 5% cash back on groceries
• 4% cash back on transit
• 3% cash back on gas
• 2% cash back on recurring payments
• 1% cash back on everything else

At first glance, these changes look highly competitive, with a best-in-class earn rate on groceries and transit. However, my excitement is heavily tempered by very low monthly limits on each category.

Groceries and recurring payments earn the bonus rate up to $500 per month in each category; then, the rate drops to 1%.

This is likely sufficient if you live alone and buy food and utilities for one, but I suspect you’ll easily exceed the category limits if you frequently feed a large household and pay detached-home-sized bills.

As for transit and gas, the bonus rate is limited to $300 per month in each category.

While this is a higher transit rate than any other card in Canada and a competitive gas bonus, the benefits are still limited to households with one or two commuters.

The monthly limits hurt anyone with inconsistent spending, whereas a yearly category cap would be much more flexible and consumer-friendly. Over a full year, the grocery limit amounts to a paltry $6,000, which pales in comparison to other 5% grocery cards such as the American Express Cobalt Card with a $30,000 annual limit, or the Scotiabank Gold American Express Card with a $50,000 annual limit.

Overall, these changes are an odd choice in my opinion. The tiered category structure is overly complicated, and I’m surprised to see a card with a premium income requirement giving lower rewards on the higher spending that often goes hand-in-hand with higher income.

New applicants can currently earn 10% cash back on all purchases, up to $200 in rewards, with the first-year annual fee waived – the industry standard welcome bonus for premium cash back credit cards.

What About the BMO World Elite Mastercard?

Just as a lunar eclipse casts the Moon’s shadow over Earth, the BMO eclipse Visa Infinite Card had cast a shadow over the BMO World Elite Mastercard upon its launch last November.

Prior to the launch of the new Visa cards, the BMO World Elite Mastercard was the only premium card that earned BMO Rewards. This card isn’t changing, and will continue to earn rewards as follows:

• 3 BMO Rewards points per dollar spent on travel, dining, and entertainment
• 2 BMO Rewards points per dollar spent on everything else

The BMO Rewards devaluation brings the real returns down to 2% and 1.33%, respectively, leaving the earning rates here outclassed by both BMO’s own products and those of BMO’s competitors.

Dining spend would be better served by the BMO eclipse Visa Infinite Card at 5 points per dollar spent. Meanwhile, entertainment would be better with the Scotiabank Gold American Express Card at 5% returns. Travel and uncategorized spend would be better on the TD First Class Travel Visa Infinite Card, at 4.5% (versus 2% with BMO) or 1.5% (versus 1.33% with BMO) respectively.

In addition, BMO’s Visa Infinite, other World Elite, and all of the aforementioned competitor’s cards have annual fees of $120. The BMO Rewards-earning BMO World Elite costs a puzzling $150 per year, without additional benefits to justify the higher cost.

For even greater savings, the BMO eclipse Visa Infinite Card offers a $50 annual lifestyle credit. I’d say that this credit fills the same niche as the BMO World Elite’s bonus categories. You’d have to spend $3,750 per year on entertainment on the World Elite before the value of the category earn rate exceeds the Visa Infinite lifestyle credit.

As BMO adjusts their other Mastercards, they’ve ignored the BMO World Elite Mastercard, leaving their former flagship card urgently in need of a positive refresh if it is to retain its place in the market. 

BMO Credit Card Comparison

With such a wide variety of category bonuses and points valuations, here’s a quick breakdown of how BMO’s roster will look going forward, comparing the real percentage-based earning rates across each card:

Conclusion

When the BMO eclipse Visa cards first launched, Ricky had mentioned that BMO only needed to improve the value of their BMO Rewards program in order to compete in the big leagues.

Instead, BMO will be taking the opposite route and devaluing an already weak program so soon after launching new premium products. I don’t see how this could possibly be inspiring for new or existing BMO cardholders.

Despite the addition of category bonuses on the BMO Air Miles World Elite and the BMO CashBack World Elite, I think these changes are a net negative. I find it useful to have cards with high base earn rates for uncategorized spending, but since the new category bonuses and limits are inferior to other competitors, I don’t think the trade-off is worth it.

The benefits of these changes will be limited to very specific types of spenders. The Air Miles changes give a bump to everyday Air Miles collectors, in particular anyone who stretches the value of their points by earning Dream Miles and redeeming for travel instead of cash back. The CashBack changes are beneficial for people who won’t vastly exceed the monthly category caps and who prefer the flexibility of cash over the value of travel points.

For anyone else, the BMO eclipse Visa Infinite Card is still likely a better choice even with its devaluation, or you could turn to the Amex Cobalt Card or the Scotia Gold Amex as alternative cards with high earning rates on your high-spend categories.

For existing cardholders or prospective applicants, these changes won’t take effect until May 2021. If you’re not a fan, you have lots of time to shop around for another rewards strategy.