Is It Free, or Is There a Fee?

Introduction

Advertisements are everywhere, shaping our choices and influencing how we spend our money. Companies will create advertisements using a wide variety of media types, including:

• print media, such as magazines
• broadcast media, like television
• digital media, including websites and social media posts
• out-of-home media, such as billboards and posters

These advertisements might use specific language, logos, slogans, and deals to appeal to their target audience. So, how do you know when a deal is really worth it? Let’s use our critical thinking skills to find out!

Identifying incentives

Companies try a variety of methods to convince people to buy their products. Before we continue, let’s pause to consider some vocabulary terms connected to our learning.

Let’s explore some examples of incentive and loyalty programs.

Types of incentives

Some of the incentives that companies might offer include:

• buy one get one 50% off
• buy one get one free (BOGO)
• discounts (for example, 25% off)
• free shipping with orders over a set amount
• free gift after spending a specific amount on purchase

Who benefits from these incentives?

It’s always important to pause and calculate whether a deal really helps you save money, stay safe, and find the best product for you. Companies may create incentives to increase sales, turn over old inventory, inspire brand loyalty, and bring in new customers. It’s our responsibility as customers or consumers to think critically before making the decision to buy anything. When you’re considering buying something that has an incentive, consider the following factors:

• Online-only deals: Sometimes a deal is only available online which means that you must make an online purchase using a credit card or other online payment method. This does not work for people who use cash or bank cards to pay for items.
• No physical inspection: When buying a product online, you cannot examine it as closely through a website, app, or social media post as you can in person.
• Hidden shipping fees: There may be hidden fees for shipping that you only notice when checking out.
• Disclosing personal info: An online discount might also involve you providing personal information (such as: your name or your email address) to the company or volunteering to receive regular emails and newsletters.
• Unplanned purchases: If were thinking of buying one item, but there is a sale or buy one get one discounted, you to buy more than what you originally planned.

Loyalty programs

Companies may have a loyalty program where every time you shop with them you accumulate points. Once you have reached a certain number of points, you might receive a discount, a free item, or another reward. This is an incentive that will keep people returning to shop over an extended period.

Loyalty programs might require a free sign up, or a small fee to get started. Sometimes, you will need to enter personal information to create an account, which may include your name, address, email address, phone number, or more personal information.

There may be additional rules to loyalty programs, so it is always important to pause and consider the advantages and disadvantages of these programs. Perhaps the product is not something that you buy regularly, and a loyalty program either makes you feel pressure to buy more, or it’s not used at all.

Credit cards

Financial institutions offer different types of credit cards to meet their customers’ financial needs and spending habits. This allows credit card companies to manage lending risk, target certain demographics, and incentivize consumers. The categories of cards may include:

• Cashback and rewards: customers receive a percentage of money back on purchases or specific reward points
• Retail or store cards: issued by a store that may be limited to use only at that chain of stores
• Low-interest cards: designed to carry a balance with generally lower annual fees and fewer perks than typical cards
• Secured cards: requires a cash deposit to act as a credit limit and is used to rebuild credit
• Business cards: a higher credit limit card issued to corporations or companies for employees to use on business costs
• Student cards: entry-level cards with relaxed credit requirements allowing students to build a credit history

Annual fees

Some credit cards charge the cardholder an annual fee. This fee must be paid by the cardholder every year to maintain an active card account. The amount the cardholder is required to pay is usually linked to a card's benefits. Cards with higher annual fees usually have higher reward-earning rates or other perks. Annual fees can range from $20 to $150 for standard rewards cards.

Annual Percentage Rates (APR)

The Annual Percentage Rate (APR) of a credit card represents the yearly cost of borrowing money using a credit card, including the interest rate and late payment fees. Interest will be charged if the cardholder does not pay back the money according to the rules set out by the company.

Some credit cards may have multiple APRs depending on the type of transaction. For example, one card may have a lower introductory rate for new cardholders, but a higher rate will come into effect after a certain time. A credit card may also have a different, and often higher, APR for cash advances taken from the credit card.

The following table lists the APR that is applied to typical credit card purchases for different categories of credit cards.

Card category	Typical purchase APR
Cashback and rewards	19.99% – 25.00%
Retail or store cards	25.00% – 29.99%
Low-interest cards	10.99% – 13.99%
Secured cards	19.99% – 24.99%
Student cards	19.99% – 21.50%

Rewards

Some credit card companies provide cards that accumulate points or provide rewards. Rewards might include the following:

• earning cashback
• earning points to redeem for products or services such as dining, travel, and groceries
• earn rewards on banking products like extra credit or savings

Additionally, rewards credit cards may be offered to people on certain conditions. Some might include the following limitations:

• stable employment history (e.g., proving an annual income)
• on-time payments (e.g., minimum payment, partial payment, or whole balance)
• no new recent credit inquiry (such as an application for a new card)

Consider an example

Let’s explore the following credit card offer. What do you notice?

Who might the target audience be?

Did you notice any incentives or limitations in the fine print of the credit card offer?

Let’s find out what Mehar and Devon noticed about this credit card offer.

Press the Canadian Bank Saver Credit Card button to consider the same credit card again, with a critical thinking lens.

Canadian Bank Saver Credit Card

Further thoughts

In the Canadian Bank Saver Credit Card example, the customer was offered a 0% introductory APR for the first 12 months. After 12 months, the APR was variable and much higher at almost 20%. Although this seems like a big adjustment, this is within the typical range for most credit cards. When choosing to apply for this credit card offer, a consumer would need to decide if all the incentives and limitations, including the APR, were right for them.

Compare and contrast

Let’s compare a few different types of credit cards. The following table compares and contrasts three credit cards. As you analyze the table, consider the following three questions:

1. What do you notice about each?
2. Who might be the target audience?
3. What are the incentives and fees attached to each type of card?

Financial Institution	Royal Bank of Canada	TD Canada Trust	Scotiabank
Card type	World Elite Mastercard	Platinum Visa	Gold American Express
Interest rate	19.99%	19.99%	19.99%
Annual fee	$0	$89	$129
Minimum credit limit	N/A	$2,000	$5,000
Features	Get an annual World Elite round-trip companion voucher starting at $119 CAD (plus taxes, fees, and other ATC charges). Get up to 450 WestJet dollars – 250 welcome WestJet dollars plus earn an additional 200 WestJet dollars when you spend $5,000 in the first 3 months.	Earn 3 TD Rewards Points for every $1 in grocery purchases and regularly recurring bill payments. Earn 5 TD Rewards Points for every $1 when you book travel online through Expedia. Earn 2 TD Rewards Points for every $1 you spend on all other purchases.	Earn 5 times Scotia Rewards points for every $1 CAD spent on eligible grocery stores, restaurants, fast food, and drinking establishments - includes popular food delivery and food subscriptions.
Minimum income	$80,000	none	$12,000

Self check

Let’s check your learning about whether a feature is an incentive or a cost. Place the following terms into the categories that best match. Use the arrow buttons to navigate between cards.

Is it a good deal?

Tips for online research

When doing research on the Internet, it is important to stay safe and stay focused. You can use the acronym TRUST to guide you as you do your research.

Reflection

After completing your research, consider two to three of your main takeaways. If possible, share your takeaways with a partner.