Magazine article American Banker

Cobranded Card Issuers Beginning to Compete on Price, Study Finds

Magazine article American Banker

Cobranded Card Issuers Beginning to Compete on Price, Study Finds

Article excerpt

Issuers of cobranded credit cards managed for several years to avoid the fierce pricing wars of the card business, but according to a recent study, such cards are no longer above the fray.

The study, conducted by Behavioral Analysis Inc. of Tarrytown, N.Y., shows that more than 50% of cobranded offers in the third quarter of 1995 sported a teaser rate, compared with 20% over the same period in 1994. In addition, the percentage of cobranded offers with balance transfer options doubled in 1995 to 80%.

Lisa Itzkovitz, marketing director at the research firm, said such cards traditionally have not competed on price, relying instead on the appeal of their rebate feature, which gives cardholders discounts on goods and services.

Despite higher pricing, more people respond to direct mail offers promoting cobranded cards, said Ms. Itzkovitz, "because they provide a real value to the cardholder like airline mileage and discounts on auto purchases."

The higher interest rate charged for cobranded cards, from 17% to 20%, is supposed to offset the cost of aligning with a marketing partner and sharing profits from the program. Interest rates on standard cards range from about 8% to 16%.

Ms. Itzkovitz attributes the lowered pricing to the increase in the number of issuers peddling such cards.

"The value of teaser rates is primarily if not totally relevant to new account acquisition," added Don Berman, president of Cardholder Management Services, Plainview, N. …

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