Neo Financial is making waves with the launch of their new World Elite Mastercard. This latest offering combines the traditional benefits of a World Elite Mastercard with Neo Financial’s unique perks, promising a compelling new option in Canadian’s credit card portfolio.

The Basics

Here’s a breakdown of what this new card brings to the table:

• Cash Back: Earn an impressive 5% cash back on gas and grocery purchases, and up to 2% on other purchases.
• Travel Benefits: This is the first Neo Financial-branded credit card to include premium travel benefits. Previously, these were only available through Neo’s “Perks” program and required additional purchases.
• Annual Fee: The card comes with an annual fee of $149.

Earning Caps

While the perks are substantial, they do come with earning caps, see below:

Some More Changes

In addition to the new card, Neo Financial has made several updates to their portfolio effective August 1st:

• Tiered Cash Back Rates: The cash back rates are now tiered. The guaranteed minimum of 0.5% cash back on the Neo Credit Card has been eliminated.

• Everyday Spending Account: The interest rate on this account has dropped from 1% to 0.1%, pushing consumers toward the High-Interest Savings Account.
• Increased Perks Pricing: Prices for some Neo “Perks” are increasing:
  • Premium: $4.99 to $9.99 (1-month free trial)
  • Travel: $4.99 to $7.99

World Elite Mastercard Perks

The card also comes with several standard World Elite Mastercard benefits:

• Travel Insurance: Includes a robust travel insurance suite, featuring car rental insurance.
• DragonPass Membership: Provides access to DragonPass lounges, though each entry costs $32.
• Other Perks: While not all details are confirmed, it is expected to include other typical World Elite Mastercard perks.

Analysis and Thoughts

Neo Financial’s direction with this card is surprising but intriguing. I’ll be keeping an eye on how this impacts their adoption rates over the next year. Neo appears to be targeting DINKS (Dual Income, No Kids) and young urban professionals, aligning with their choice of partners.

In December 2022, I predicted Neo would take steps similar to this. However, I have some concerns:

• High Requirement for Maximum Benefits: To earn 5% cashback on gas and groceries, you need to maintain a $10,000 balance in their ‘Everyday’ account.
• Base Earn Rate: A 2% base earn rate is attractive, especially for purchases at places like Costco.
• Reduced Everyday Account Earnings: The Everyday Account now earns only 0.1%, a significant drop from its previous 1%.

Takeaways

For the average consumer, here’s how the numbers break down:

• Keeping $10,000 in Neo’s account: You’d earn about $940 in cashback annually.
• High-Interest Savings Account (HYSA): At a 5% interest rate, you’d earn $931 in combined cashback and interest. This makes Neo’s option slightly better but only marginally.
• Max Earn Rates: If maximizing both accounts’ earn rates, Neo’s account could yield $1,290 compared to $1,071 in a HYSA.

While Neo’s strategy aims to create an ecosystem, it seems complex to communicate effectively. Customer service reps might face challenges in addressing customer queries and complaints.

Perks Comparison

The World Elite Mastercard’s perks, though decent for the $149 annual fee, require keeping $10,000 locked away. Comparing this to the Scotia Visa Momentum, which has a $120 annual fee and earns at least $540 in cashback without any balance requirements, the latter might be more appealing for some consumers.

Additionally, like all World Elite Mastercards, Neo’s card requires a minimum income of $80,000 personal or $150,000 household.

Conclusion

Overall, it’s commendable that Neo Financial is trying something different. However, the complexity of the offering may hinder its success. Only time will tell if this strategy pays off for Neo.