So I received in the mail today a letter from my bank, CIBC. The letter informed me that they were going to lower the interest rate for my VISA card from 20% for purchases and 22% for cash advances to 8% for both, effective April, 2013.

I was immediately skeptical of this decision. The primary function of a bank is to make money and to do so in a manner that is most efficient for the bank. I don’t begrudge them for that. Banks don’t exist to help people out or make their lives easier. That may happen as a side effect of making money but that’s not why they exist. Keeping that in mind, it seems odd they would be doing this to me. Lowering the rate, theoretically makes them less money from me.

It didn’t take long for me to realize this was CIBC’s strategy to “shake the tree” a bit. So let’s look at my VISA account. I don’t carry a monthly balance. Outside of my mortgage, I don’t have any debit. I pay off my VISA bill every month so CIBC makes no money off my balance. It’s been like that for well over five years. I guess CIBC analyzed my account and realized for the foreseeable future I wouldn’t be generating them any money through my VISA card. It didn’t matter if my interest rate was 5% or 50%. They decided to lower the rate in the hopes that I’d see the allure of cheaper credit and the lower cost of borrowing. CIBC is trying to make it seem more attractive to spend money that I don’t have. Maybe I was holding back on buying a new TV because I didn’t want to pay 20% interest but now at 8%, that’s a little more reasonable. The letter even states that with a lower rate, I can use my card “more often”. Perhaps if I use my card more, I’ll start carrying a balance month to month now.

From my point of view, I won’t turn them down. I’m glad the interest rate is much lower now. If for some reason I need to start carrying a balance, that’s money saved right there. It’s a bit of a larger safety net. I won’t, however, look at this as a green light to start making more purchases. Who wants a new TV?!!?!?!

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