In a new trend in the affinity credit card market, several companies are putting marketing muscle behind card products that let parents earn reward money for their childrens schools or college education funds.
Previously, products of this type got little fanfare, since unlike air-mile cards, which charge annual fees they have not been seen as particularly lucrative for the companies that offer them.
But now the firms have hit on a formula that they think will make these cards top-of-wallet: Instead of offering cards that spin off dollars for an alma mater or other charitable cause, these products let people earn rewards for their own childrens school or tuition account. Cardholders get the feeling they are earning benefits directly.
The market for affinity and loyalty credit cards is largely saturated, with dozens and dozens of products that generate income for colleges, nonprofits, and professional associations. The latest products hit closer to home. For example, the First USA division of Bank One Corp. has begun issuing a card with General Mills Inc.s Box Tops for Education promotion, which encourages schoolchildren to cut coupons from cereal and snack food boxes and give them to their schools, which can redeem them for cash.
Target Corp. seems to have started the trend, by allowing its credit card holders to direct a contribution to their childrens schools.
Another credit card that touts an educational rebate theme is Upromise Inc., a Brookline, Mass., company that partnered earlier this year with Citigroup Inc. to issue a credit card that rebates a percentage of purchases to the cardholders college education fund. Dozens of merchants, including General Motors, McDonalds, and Exxon Mobil have joined the program to pay a rebate to the consumers education fund for each purchase.
At McDonalds, tray liners promote the program with a take a bite out of college tag line. The loyalty program is marketed as a way for parents and other family members to live up to the unspoken promise of providing their children a college education.
One expert says these products represent a way for card issuers to break through loyalty-marketing clutter, and even take advantage of the potentially waning fortunes of the ever-popular airline mileage cards.
Cobranding has run its course to a certain extent, said John C. Grund, partner at First Annapolis Consulting of Linthicum, Md. With garden-variety points and rebates programs, it is hard to differentiate oneself.
Though the companies that run air-mile programs are busy offering extra reward incentives to keep people flying, Mr. Grund suggested that consumers, worried about the economy in general and air travel in particular, may be somewhat less enthusiastic about collecting airline miles on their credit cards, traditionally the most popular of the points programs.
New cards that make rewards closer to home could gain a more receptive audience than before, he said.
Mr. Grund and Patrick Regan, First USAs senior vice president of affinity and sports, said the Box Top Visa card may find a larger audience than some might guess. More than 65,000 of the nations approximately 100,000 elementary schools collect the pink and purple cardboard coupons. They trade in the Box Tops to General Mills for about 10 cents each, up to a total of $10,000 dollars per year per school. General Mills has given out $50 million to schools since it introduced the program in 1996.
Given the devotion with which parents collect the little cardboard squares, General Mills, the Minneapolis-based cereal manufacturer that funds the program, began looking last year for ways to spread its influence even further. It took a page from other charitable organizations and partnered with a bank to issue a credit card that would benefit the cardholders own neighborhood school by donating 1% of the cardholders purchases. First USA won the contract and began issuing the card, which features a Box Top on its face.
Mr. Regan said this affinity card is different from the rest.
We have 800 affinity and another 30 to 40 cobrand cards that all give some kind of rebate back to the institution, but this hits so close to home, he said. It will be very interesting to see how this works.
Though Mr. Regan says First USA did not come up with the idea for attaching a card to the popular self-help schools charity, he says the company will be on the lookout for other such opportunities.
General Mills will promote its credit card at schools as a way for parents to help fund local programs. Mr. Regan said any in-school marketing will be conducted with care.
We want parents to be involved with their schools, he said, but we are not asking to put applications in the kids hands.
