Flurry of credit cards for affluent people, small businesses launched
Well-to-do and big chargers lured with boosted rewards, other goodies
By Tony Mecia | Published: August 26, 2011
A flurry of new credit cards hitting the market this week underscores that card issuers are still seeing opportunities among affluent consumers, despite recent economic turmoil.
Among those announced this week: a new American Express co-branded card with Mercedes-Benz; upgrades to Chase's premier upscale rewards card, Chase Sapphire Preferred; and a new Capital One cash-back card aimed at business owners.
During the economic downturn of the past few years, card offers aimed at low- and middle-income consumers had slowed. But even with recent stock market gyrations and worries about consumer spending, this week's brisk pace of card launches suggests that card issuers are continuing to mine for well-to-do customers.
"To card companies, they're still very attractive cardholders, especially in this cautious credit-issuing market," says Ken Paterson, vice president of research operations for Mercator Advisory Group. "But there's not an unlimited or quickly growing supply of those people out there."
To be sure, the wealthy represent just a small slice of card customers. All told, there are 3 million U.S. households that spend more than $4,000 a month on credit cards, representing the top 2 percent of households, according to a Mercator study released last month. The number of households with net worths of more than $500,000 has stayed flat since 2007.
The wealthy get different cards than you and I
Still, it's a great time to be a wealthy cardholder. To lure customers from each other, card issuers have had to offer increasingly generous and creative perks. They've raised sign-up bonuses, offered one-of-a-kind rewards such as hot-air balloon rides and outings with pro golfers and increased personal service. Knowing that the wealthy like to travel, they're waiving foreign-transaction fees, offering perks on airlines such as expediting check-in and developing cards compatible with European chip-and-PIN card processors.
The issuers are devising more ways to win business from the affluent because they're developing a better understanding of the niche markets within that group, says Beth Robertson, director of payments research for Javelin Strategy & Research, a financial services consulting firm. For instance, they can design travel rewards for jet-setters, develop specialized cards for private banking clients and devise creative excursions for people who enjoy exclusive events.
To keep profits up, they're looking to develop stronger products for the affluent segment and continue to appeal to that segment.
|-- Beth Robertson
Javelin Strategy & Research
There are other reasons why banks find the wealthy to be especially appealing targets these days, she says: Affluent cardholders are less likely to default than cardholders who are higher credit risks. Also, new regulations from Washington limiting transaction fees on debit cards are making credit card transactions more lucrative for banks, and those who have more charge more.
"To keep profits up, they're looking to develop stronger products for the affluent segment and continue to appeal to that segment," Robertson says.
AmEx, Mercedes rev up deals
To American Express, this seemed like a fine week to launch a new card in partnership with Mercedes-Benz. Stocks have fallen 10 percent in the last month and unemployment is near a 25-year high, but American Express has high hopes for the card based on the data it is watching.
"On the surface, it may seem counterintuitive given the turmoil in the marketplace," says Gunther Bright, AmEx's senior vice president and general manager of co-brand partnerships. "We looked at the purchases on Mercedes-Benz's side. They have had record sales this year. We looked at our base in terms of more affluent cardholders, and spending has actually increased double-digits."
He says wealthy cardholders aren't resistant to economic forces, but they've been more resilient than segments with less money.
The Mercedes-Benz credit card offers five times the American Express Membership Rewards points for charges at Mercedes-Benz dealerships, triple points for gas and double points for restaurants, plus a $500 certificate for the purchase or lease of a car (after $5,000 in spending), 1,000 extra miles on a lease and an annual $50 certificate for Mercedes-Benz accessories. The annual fee is $95.
For $475 a year, a platinum version of the card offers more generous certificates plus access to airport clubs, hotel perks and a personal concierge service.
American Express will also offer service packages and $1,000 Mercedes-Benz certificates through its Membership Rewards program.
Chase upgrades Sapphire Preferred
Also this week, Chase upgraded its Chase Sapphire Preferred card so that it offers double points on travel and dining purchases. A news release said the upgrades, combined with existing features including no foreign transaction fees and dedicated customer service, make the card "the perfect rewards card for affluent card members who love travel and dining."
One of the things we realized about the affluent customer is they're affluent for a reason. They do their research. They're making sure their dollar is working hard for them.
|-- Brent Reinhard
Brent Reinhard, marketing director for Chase Sapphire, said Chase made the change to make the card more attractive to the affluent segment.
"One of the things we realized about the affluent customer is they're affluent for a reason," he says. "They do their research. They're making sure their dollar is working hard for them. For us, it was important to make sure we had a really strong value proposition that resonated with this segment."
Business cards launched
There were also several announcements this week of new or enhanced cards for business owners, which card issuers often categorize as affluent because they spend a lot:
- Capital One launched a new small-business card, the Capital One Business No Hassle Cash Premier card, which offers 2 percent cash back on all purchases. "No major competitor has as high a cash-back rate across all purchases as our new small business cash back card," the company said in a release.
- American Express launched a Business Gold Rewards Card that includes double points on online marketing expenses and allows business owners to redeem reward points for Facebook ads.
- Startups use tech to put cardholders in charge of security – With data beaches on the rise, startup companies are developing new options that help consumers minimize their exposure to a possible hack ...
- Which banks let you personalize your credit card? – If you've ever wanted to take you favorite pet with you in the in the grocery store or to a fancy restaurant, consider plastering their likeness on a credit card ...
- Voice assistants begin to answer credit questions – Voice assistants step into personal finance, answering questions about special deals and what you spent on your trip to Chicago. They can even pay your balance ...