Citigroup Inc. is the third bank to offer a cobranded credit card with MyPoints.com Inc. The eight-year-old San Francisco company has had a string of bad luck choosing bank partners, with previous issuers NextCard Inc. and CompuCredit Corp. shuttering those programs after stumbling into financial crises.
How did Citi woo MyPoints, an online shopping portal that offers loyalty points? The primary emphasis was on longevity, said Bill Borden, a senior vice president at Citi Cards in charge of new product and business development.
The largest U.S. credit card issuer offered MyPoints, along with its 10 million members, "marketing and product expertise and the reassurance of having long-term tenure in this relationship," Mr. Borden said in an interview last Friday.
"Their last product was with an organization that ultimately went away," he said, an oblique reference to the defunct Internet-based Visa issuer NextCard, which filed for bankruptcy protection last year after regulators shut it down because of dizzying chargeoffs.
Helen Joo, a vice president at MyPoints in charge of partnerships, said the MyPoints segment of the portfolio did not contribute to NextCard's high losses. NextCard, she said, held a higher credit standard for its cobranding applicants than for its proprietary segment.
Mr. Borden said Citi was not concerned about the credit quality of MyPoints customers, who he said are "extremely engaged" in the online rewards program. MyPoints credits members not only for making purchases, but also for submitting personal information through surveys, e-mails, and trial offers.
MyPoints members, Mr. Borden said, "have opted in to being marketed to" - an optimal condition for pitching credit cards. Moreover, he said, they do a lot of shopping through the portal, he said. The new cobranded card, a Platinum Select MasterCard, earns cardholders one point for every $2 spent, with an annual ceiling of 15,000 points. Bonus points are awarded for online purchases through the MyPoints site. The card is being marketed through the MyPoints Web site, e-mail, and other channels.
Ms. Joo said NextCard did not tell her company it was in trouble and facing regulatory action before it folded the cobranded card. Instead, NextCard simply began turning down applicants and informing cardholders that it could no longer honor their loyalty points for redemption. MyPoints was able to reassure those members that their points would be honored, but "it put us in a very awkward position," Ms. Joo said in an interview Tuesday.
Those MyPoints customers have been without a supporting credit card program for over a year, she said, but she was confident that most would now sign up for the Citi card. Because the NextCard customers were MyPoints' most avid customers, they continue to seek ways to accumulate more points. She could not disclose how many cobranding customers MyPoints had with NextCard, but she said it had achieved "great penetration very fast."
"When we began the cobrand product with NextCard, we were a start-up and there were lots of questions about whether or not we would last," Ms. Joo said. "Little did anyone think that the bank would actually go out of business."
Before NextCard folded, MyPoints began an issuing relationship with CompuCredit, the subprime issuer in Atlanta that said it could offer cards to applicants in a wider risk range. CompuCredit pulled back after 10 months when it began experiencing high losses in its overall portfolio.
Ms. Joo said the fiascoes with NextCard and CompuCredit were valuable in one sense.
"One of the dangers when considering potential partners is only looking at the short-term financial and revenue component of the deal and not looking at the long-term stability of the company," she said. "You would think you would not have to question that, but that's one lesson we learned."
