Capital One Financial Corp. is attempting to grab market share with what observers call an unprecedented miles-match promotion whose timing may be strategically calculated to take advantage of the turmoil surrounding proposed debit card regulations.
The company's "Match My Miles Challenge" offers to match up to 100,000 miles in existing airline credit card rewards programs for new customers of its Venture Card. New cardholders also will earn an additional one-time bonus of 10,000 miles.
To qualify, cardholders must provide proof of their miles in other programs and then spend at least $1,000 within the first three months. The Visa card carries a $59 annual fee, which Capital One waives the first year.
The Federal Reserve Board has proposed new rules that would cap debit interchange fees at 12 cents per transaction, which is causing some issuers to rethink their debit rewards programs.
Capital One is in an unusual position to move aggressively in offering a new rewards program because it has less to lose in "shaking up" the relative value of its credit and debit rewards programs, said Brian Riley, senior research director at TowerGroup.
Riley said Capital One has a relatively low share of debit cards compared with its rivals among the nation's top five credit card issuers.
"Certain other big credit card issuers, such as Chase, Bank of America and Wells Fargo, all have huge debit card portfolios whose economics are in flux right now before we know the final outcome of proposed new debit card interchange rules," Riley said. "Big debit card issuers are on hold right now and are re-evaluating their overall reward card strategies, so they are unlikely to react immediately to an aggressive, short-term move like Cap One's."
The miles-matching program, announced March 10, ends May 13 or when Capital One reaches 1 billion matched miles.
A 30-second TV spot starring the actor Alec Baldwin touts the promotion and other features of the Venture card.
The promotion, which Capital One says represents an $1,100 value, is "among the richest we've seen lately," said Megan Bramlette, director of knowledge management at Auriemma Consulting Group. It also underscores Capital One's new emphasis in targeting upscale customers, as card issuers increasingly gravitate toward heavier-spending, less-risky customers, she said.
"With a promotion this aggressive, Capital One is clearly going after a sector of affluent, stable consumers who travel a lot, and they are going after some of their competitors' best customers," Bramlette said. Capital One on its website says the offer is for customers with "excellent" credit.
The promotion may appeal only to a relatively narrow group of customers, Bramlette said.
Airline cards today account for about 11% of all rewards cards, down from a high "approaching 20%" several years ago, Bramlette said. "Consumers have the perception that airline miles aren't as valuable today as they were awhile ago because airlines have made it tougher to redeem miles."
Consumers also are traveling less because of high travel costs, Bramlette said.
"Consumers have showed a preference for cash-back rewards, but this promotion provides a solid value to anyone who might travel," Bramlette said. "Consumers generally are less and less loyal to airlines; they are looking for any seat offering the best deal."
