Less than five months after buying Circuit City Stores Inc.'s store and cobranded credit card portfolio, J.P. Morgan Chase & Co. is trying to maximize cardholder accounts, transaction volume, and profits with a rewards program.
The New York banking company is offering a newly designed card to current cardholders and other Circuit City customers. The cards, which officially premiered this week, will present the same rewards on both the Visa and private-label version: 5% cash back in the form of a Circuit City gift certificate on all in-store purchases, except those made with special financing offers. Outside purchases gain 1% back.
Customers can obtain a certificate as soon as they have earned 500 points.
Circuit City spokesman Bill Cimino said the rewards program was the company's first and was designed to help it compete with Best Buy Co. Inc. of Minneapolis.
"We think it will help not only keep traffic but increase repeat business," Mr. Cimino said. Customers will be able to choose a Visa or store card, provided their credit qualifies.
Circuit City, of Richmond, Va., has 618 stores in the United States. It has had its own in-store credit system since the early 1990s and a Visa cobranded card since 2002.
In 2003 it sold a separate $1.5 billion Visa portfolio, which had been handled by its bank subsidiary, to FleetBoston Financial Corp. for a 13% discount. Chargeoffs for that portfolio, which was not associated with the Circuit City brand, had been around 16%.
This year Circuit City decided to get out of the card-issuing business altogether. The private-label and cobranded Visa portfolio had chargeoffs in the 5%-6% range at the time it went on the block, according to analyst estimates.
In May, Bank One bought the $1.8 billion of receivables for face value. It was the Chicago company's first private-label portfolio purchase since it sold off its share in a private-label joint venture with the GE Capital unit of General Electric Corp. Bank One merged in July with JPMorgan Chase, which also had not had a private-label business.
In a conference call shortly after the Circuit City purchase, then-Bank One chairman and CEO James Dimon said that "it has become obvious to us that we need to be in" private-label "because in some cases, private-label and cobranding in cards come together."
Mr. Dimon and his cards executives have also spoken glowingly about rewards programs connected to credit cards and have fashioned some high-profile ones, including partnerships with Starbucks Coffee Co. and Walt Disney Co.
Mr. Cimino said the new rewards program emerged from "the relationship with Bank One."
In a press release, Circuit City's chairman president and chief executive, W. Alan McCollough, said the rewards program would be "loyal to our customers. One of the key benefits of this program is that it offers Circuit City customers a choice when making purchases at our stores. They can opt to earn rewards for their purchases or take advantage of special promotional financing we offer on products."
Both Circuit City and Best Buy offer customers special financing offers on merchandise. A current Circuit City offer is a free home theater system with any television costing more than $999, along with no interest for 18 months and free delivery.
