Green Dot Corp., which began a pilot test
The Monrovia, Calif., company originally said it would decide this month whether to increase the $200 line of credit for holders of the Green Dot Visa Gold Card who had demonstrated their creditworthiness. But Steven Streit, Green Dot's president and chief executive, said this week that the trial period was too short to yield accurate results. The data generated so far has not been sufficient to determine factors such as delinquency rates, he said.
"Since we started the program in November, people didn't have to pay for 30 days, and that means a lot of statements didn't come until early January," Mr. Streit said. "At this point you only have 1.5 or two billing cycles under our belt, so it's really too early to draw any conclusion."
Mr. Streit said he decided to continue the trial because the product has sold well (though he would not give sales figures). He said he always knew that collecting enough data would take some time.
At least six months is needed to assess the program properly, he said.
"Ultimately, the sustainability is related to what the consumer behavior pattern is like over time, and because we're too early into it, frankly, we don't know how sustainable it will be over time, and that's the nature of why we want to gather data and analyze it," Mr. Streit said.
Green Dot, best known as a marketer of prepaid debit cards sold at drugstores, grocery stores, and other retailers, is the first company to sell credit cards at the point of sale. To get the card, consumers buy a package at one of Green Dot's retail partners and then call the company to activate the card. Cardholders verify their identity by providing their Social Security number and other personal information. The company does not take financial history into account when extending credit.
The $530 million-asset First National Bank of Fort Pierre, S.D., issues the cards and shares the risk, the costs, and any profits with Green Dot.
Some observers criticized the high fees associated with the card and the underwriting process, but Mr. Streit reiterated that the fees are lower than what subprime consumers would pay at payday lenders.
Cardholders initially pay $89.95 for the package, including a $70 annual fee. Green Dot also charges a $4.95 monthly fee. The interest rate is fixed at 11.9%, with a standard grace period of 25 days.
"From the pricing point of view, it's priced significantly below the market for this type of card product, and at the same time its underwriting is in such a way that it's available" to the widest possible group of consumers, Mr. Streit said Wednesday. "Our hope is that as we continue to gather data, that we can bring down the annual membership and other risk-mitigating pricing even lower than it is today."
Green Dot is selling the card package at only 200 of the 55,000 locations where it sells other payment products. It has not disclosed which locations sell the credit cards. Mr. Streit has said he fears researchers and competitors would buy the package and skew his data.
Retailers that sell Green Dot's prepaid cards include Cumberland Farms Inc., CVS Inc., Dollar General Corp., Eckerd Corp., Food Lion LLC, Hess Corp., Kum & Go LC, Pantry Inc., Pathmark Stores Inc., RadioShack Corp., Rite Aid Corp., Sunoco Inc., and Walgreen Co.
