TD Bank eliminates interest on credit cards in favor of subscriptions

American bank TD Bank has just updated its range of debit and credit cards. The program includes the launch of two new credit cards that stand out on the market by promising to charge their users no interest. Invoicing for the bank's services now takes the form of a single monthly subscription, enabling TD Bank to set itself apart quite radically by focusing on transparency.

FACTS

• TD Bank has buried the fees, commissions and interest associated with the use of its credit cards. The American bank has just introduced two new cards, called TD Clear, which, even in their name, carry the promise of total transparency. 

• Both cards are subject to an extremely simplified pricing structure, with a fixed monthly fee. 

• Each card has a different spending limit and its own subscription: 

  • for a maximum spending limit of 1,000 euros per month: subscription at 10 euros per month;

  • for a maximum spending limit of 2,000 euros per month: subscription at 20 euros per month.

CHALLENGES

• Introduce transparency into the credit card business model : Credit cards have long been criticized for the excessive charges they impose on their holders, and in recent years, especially in the United States, they have seen strong competition from other payment and financing solutions. At the same time, alternative means of payment continue to gain ground, including in the US market, where credit cards have long been the most popular option. The launch of this new card by TD Bank represents a way for the bank to reinvigorate its offering. Here, all non-visible charges are called into question (transfer of outstandings, foreign payments, credit interest, etc.), in favor of an all-inclusive subscription, the model of which is perfectly clear.

• An entry-level offer: The two new cards offered by TD Bank come with low spending limits. They are therefore particularly aimed at entry-level customers, young people or those new to credit, who are precisely those who have recently turned away from credit cards. 

MARKET PERSPECTIVE

• TD Bank is not the only bank in the world to have opted for a drastic reduction in the interest charged on its credit cards. Two Australian players, CommBank and NAB, had already tried the experiment in 2020. But TD Bank was the first to opt for total transparency by opting for subscription.

• At the time, these launches were aimed, for Australian banks, at countering the rise of new fractional payment credit offers. A year after their launch, representatives of these banks felt that these cards had established themselves with their customers and were enjoying considerable popularity.