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Q: Co-Branded Cards vs. Affinity Credit Cards ( Answered,   0 Comments )
Subject: Co-Branded Cards vs. Affinity Credit Cards
Category: Miscellaneous
Asked by: ams143-ga
List Price: $100.00
Posted: 10 Nov 2002 12:28 PST
Expires: 10 Dec 2002 12:28 PST
Question ID: 104722
The past 15 years has seen much creativity by credit card issuers in
partnering with organizations and merchants etc. to acquire
cardholders. Two common approaches are, partnering with a CAUSE and
thereby encouraging cardholders to spend from their hearts as their
cause will benefit from every purchase. Also common is partnering with
a merchant, airline etc. and thereby giving cardholders something for
themselves as a reward in the form of points, freebies etc. Both of
these are common. My question is which cards, the co-branded (those
with a personal reward) or the affinity (those that support a cause
someone has feelings for) are more in circulation. Which of the two
have more spending and less cardholder attrition? In general what
works better for the card issuers, co-branded or affinity? While there
are issuers that specialize in one type over card issuance over
another, of those that do both, (co-branded and affinity) do they have
more cardholders of one over the other, and if yes which are more?
Subject: Re: Co-Branded Cards vs. Affinity Credit Cards
Answered By: sabrina_j6-ga on 15 Nov 2002 12:34 PST

According to the U.S Credit & Charge Cardholder Study (3Q 2000,
conducted by Silney and Rosenberg) Co-branded cards are being used
more often than any other types of credit card, including affinity
cards.  Today in some countries, over 35 percent of all cardholders
are reported to be a co-branded cardholders.

A bank charge for use of a Co-branded credit card is levied annually.
This amount can range from $15 to $300 and is billed directly to the
customer's monthly statement. In addition, Co-branded cards often have
no annual fee and possess higher credit limits. Yet despite these
inconveniences, the co-branded card still has a higher rate of
spending and cardholder attrition. This is due to the fact that
Co-branded credit cards serve to strengthen customer loyalty by
offering a variety of value-added incentives for consumers who
purchase a particular brand. In addition, increases in brand awareness
with value-added benefits also persuade customers to use an
organization’s co-branded card more frequently. This in turn
encourages consumer spending. According to the Visa Payment Systems
Panel Study (2000 Payment Method Fact Book) approximately 20 percent
of Visa bank credit card accounts are co-branded, nonetheless they
account for over 40 percent of all bankcard spending.

In general, Co-branded card work best for card issuers. This is
because issuers actually save more money than they would by issuing
their own credit card. This is due to the fact that they are not
obligated to pay costs for extending credit, or for processing
payments. Co-branded cards that are available with consumer credit
products provide a way for companies to build customer loyalty as well
as strengthen awareness of their brand and products. Large
organizations like Visa use rewards programs and special value-added
offers, such as rebates and discounts, to attract new customers and
build stronger ties with customers. This also allows the issuer to
build a valuable banking relationship with the financial institution
that issues the Co-branded card.

Affinity cards also allow bonds to develop between the issuer and the
charitable institution. They may also increase brand image through
these associations. However, issuers do not achieve significant
monetary rewards from affinity cards, and hence Co-branded cards are
more worthwhile for issuers than affinity cards. Major card issuers
offering both Affinity and Co-branded cards include Visa, MasterCard,
Discovery, and American Express. They all have more Co-branded
cardholders than Affinity Card holders. This phenomenon includes all
e-commerce and internet transactions, for which Visa reportedly holds
63% of all co-branding cards used in on-line transactions.  For more
details on the International and National Statistics for all major
Co-Branded credit card issuers, please refer to the statistics
provided at the Official Visa web page on Co-branded cards

You may find the following links useful.

Is a Co-Branded or Affinity card useful to you?

The Benefits of Co-Branded Cards

Hope this helps!

Request for Answer Clarification by ams143-ga on 17 Nov 2002 10:56 PST
While there are issuers that specialize in one type over card issuance
another, of those that do both, (co-branded and affinity) do they have
more cardholders of one over the other, and if yes which are more?

My question was not referring to the Visa/MasterCardcard associations,
American Express and Discover. I was referring to card issuers like
MBNA, First USA etc. Please answer again.

All my questions apply only to those that issue both. Where do THEY
have more success.

Clarification of Answer by sabrina_j6-ga on 18 Nov 2002 02:36 PST
Concerning your request for a clarification, MBNA America is the
undisputed leader in the issue of co-branded and affinity credit cards
today. MBNA America’s card volume is currently experiencing an average
growth of 42% per year. This issuer has a larger issuance of
co-branded than affinity cards, with seven successful co-branded cards
available to customers including the World MasterCard, Amtrak Guest
Rewards, and the Barnes and Noble card. Concerning affinity cards,
MBNA America has over four hundred cause-related and special interest
organizations in this group including the NAACP, National Wildlife
Agency, the military and numerous educational institutions. They have
just over 1.8 million affinity cardholders, which is a significantly
smaller number than the number MBNA’s seven international co-branded
cardholders. This trend is common among all issuers of both affinity
and co-branded cards, including First USA. It may be noted that even
if an issuer’s affinity cardholders exceed its number of co-branded
cardholders, the tendency of co-branded cardholders to spend more and
generate increased revenue for issuers persists. Additionally, issuers
are not responsible for arranging coverage for co-branded cards, which
is another advantage that increases the success of issuers in
reference to co-branded cards.
I hope my clarification has been satisfactory. I apologize for any
inconvenience. Thank you,
There are no comments at this time.

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