Provident Bank of Cincinnati has added an unusual card to its arsenal.
Expressly not a credit product, its MeritValu card is a customer-loyalty vehicle for merchants.
When using MeritValu with traditional forms of payment - credit cards, debit cards, cash, or checks - customers accumulate rebates that can be redeemed at any of 37 participating merchants in Cincinnati and Northern Kentucky.
The retailers include grocery stores, restaurants, gas stations, flower shops, and travel agencies.
Provident has been running a pilot for more than a month, with 4,000 cards. It plans to roll out the program in August by issuing MeritValu to 225,000 people.
"We were looking for a way to differentiate ourselves in the very competitive credit card business," said David Engel, vice president of electronic merchant services.
Rebates, ranging from 2% to 10% of purchases, are tracked electronically and updated each time the magnetic-stripe MeritValu card is swiped through a terminal following payment.
The sales receipt shows the amount of the rebate and total balance, in addition to the sale amount. Rebates can be spent immediately or allowed to accumulate with no limit.
When the MeritValu card gets swiped, information about customer purchases is also transmitted to a data base at the technical services branch of Provident Bank. The retailers can obtain such information for a fee, with the agreement that the bank does the marketing for them.
Some credit card consultants viewed the program as cumbersome.
"If you have 37 merchants, that's fine, but what if you have 300?" said Michael Auriemma, president of Auriemma Consulting Group, Westbury, N.Y. "How do you (as a customer) keep the merchants in your head? You need a book and have to pull it out every time you make a purchase."
He also called MeritValu "confusing" for merchants.
James L. Accomando, president of Accomando Consulting in Fairfield, Conn., was more optimistic but saw similar problems.
"At the end of the day, the consumer has to remember two items," he said. "What if they forget the card, or which merchants participate. If it's MasterCard or Visa or Amex, it happens seamlessly."
Window decals and point-of-purchase signs indicate merchant participation, Mr. Engel said.
Roland E. Koch, senior vice president and chief operations officer at Provident Bank, said customers catch on quickly.
"It makes people stop and think when they see a card that is not a credit card," he said, "but once they've used it the first time, they've figured it out."
Mr. Accomando said one of the card's benefits is as an aid to direct marketing, but that some customers might see the data-collection aspect as an invasion of privacy.
Mr. Auriemma said MeritValu has followed others' lead, such as NationsBank with its Start credit card. The initials stood for Spend Today and Retire Tomorrow; accumulated rebates went into a retirement annuity account. The program was suspended in 1995.
MeritValu comes with no annual fee and anyone can qualify regardless of credit history.
The $6 billion-asset Provident Bancorp. reports $63 million of outstandings on 121,000 credit card accounts. It has spent more than $3 million on development and promotion.
The bank plans to increase the merchant network and may brand the card with MasterCard or Visa.
