Living with credit, Rewards

Less is more: Issuers cutting back on niche credit cards

Julie Sherrier

“Would you like a credit card with that?”

Credit cards have been served up like French fries at fast-food restaurants.

That’s about to change. According to a recent article in the Wall Street Journal (subscription required) about Chase dropping the Starbucks Duetto Visa card, credit card issuers are “pulling the plug on some of the specialized, reward-loaded plastic they pitched to consumers when credit was easy and wallets were wide open.”

Just as eating too many fries clogs your arteries, too many credit cards have caused financial arrest. The explosion of niche-branded cards — whose rewards are tied to a specific brand or product — has now imploded consumers’ bank accounts.

There’s still way too much plastic out there. Too much plastic can only lead to one thing: trouble. And trouble is why issuers are cutting back — niche-appeal cards (think retail and alumni cards, sports team and charity cards) are now costing banks instead of making them money.

“The retreat by J.P. Morgan Chase’s unit is part of an effort to stem card-related losses that are expected to haunt the company for the rest of the year,” WSJ writer Robin Sidel says.

Affinity and co-branded cards (i.e., the Home Depot MasterCard, which was dropped in spring 2009), in particular, have suffered as cardholders struggle to make payments. The partners who offered the issuer’s cards typically receive as payment for their brand a percentage of profits or fee during the life of the contract. However, it was the issuing bank that funded the majority of the rewards and took care of the customer accounts.

It would appear that some banks have spread themselves a little thin — Bank of America, for example, has 4,400 affinity cards, according to the WSJ. And Chase is reported to have cut 90 co-branded cards where it used to have more than 200.

When speaking before an audience at the Cards & Payments Loyalty Conference in December 2009 that I attended, Rob Rosenblatt, general manager, customer loyalty, at Chase Card Services, said tongue-in-cheek: “We currently have 130 rewards programs of which 129 need to be retired.”

Just as consumers have either elected to or been forced to ratchet down the number of credit cards in their wallets, issuers are finally being forced to do the same.

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  • nidia

    Maybe not exactly related to your article, but could you please let consumers know that the ULTRA VX VISA ad on is misleading……and that it has both activation fees and annual fees?! I found out after I filled up their application (with all my SSN and personal info)..hopefully, others dont have to.

  • Greg

    Please help~ I know my question is not related to your post, but Im curious to know?
    When you have a credit card account, say company “X”, and company “X” issues you a new card, with a new number, and maybe even your ex-married name, and you filled out nothing, not even an application for this new alleged account from company “X”, isn’t that fraud? I mean issuing a person a new account number, a new card, and etc…and I didnt fill out an application, doesnt that mean the “X” company performed an illegal credit without my permission? Please email me with any