Nordstrom Inc. is raising eyebrows again with its credit card strategy.

The upscale specialty retailer, which made headlines last year by leading a new wave of Visa card cobranding, went against the grain this week when it officially launched the bank-issued card with a $30 annual fee.

That is out of sync with the "value pricing" that has swept the bank-card business along with other consumer product categories. With cardholders apparently voting with their feet against fees, few card issuers and their marketing partners dare to assess them. Or if they list a fee, they tend to waive it, at least for an introductory period.

Nordstrom Visa's interest rate, 14.9% until Dec. 31 and then 8.9 points above prime (16.15% after this week's increases), is definitely competitive.

But the Seattle-based, 77-store chain is betting that loyal customers will pay $30 for what it calls generous rebates. It kicks in at the first $1,000 of retail purchases within a year, with a 1% credit on Nordstrom goods.

Rebate Plan

The purchase dividends ratchet up by one percentage point per additional $1,000, to a maximum of 5% for $5,000 or more. The accumulated benefits are noted on monthly billing statements and credited to the account at the end of a year.

Joanne Black, a partner in the Business Dynamics consulting firm in New York and an expert in banker-retailer relationships and cobranding, said Nordstrom seemed to miss the mark. She said the plan "wouldn't persuade anybody I know," at least at the 1% rebate level, and doesn't match up well against the popular airline mileage or automobile rebate programs.

Pricing expert Robert B. McKinley noted that an average level of bank card usage would merely recoup the $30 fee.

Loyal Shoppers Targeted

"Maybe it would be a different story," Ms. Black said, "for someone who is a very heavy Nordstrom shopper."

That is exactly the point, said John Walgamott, president of Nordstrom National Credit Bank in Englewood, Colo., which is issuing the Visa card.

He said the company is focused on customer loyalty. "If you don't shop in our stores," he said, "then you won't take our card."

Nordstrom is thus taking its proprietary card program, also geared to customer loyalty, to a new level. The bank has three million active users a year and $600 million of receivables. Store-card users will be offered the same rebate benefits as Visa holders, and will be encouraged to upgrade to the globally accepted brand.

"We feel we are competing with the airline cards," which have been able to maintain annual fees because of the perceived benefits, Mr. Walgamott said.

"And we will set out to attract people who aren't shopping frequently with us," since they can use the credits effectively as Nordstrom discounts.

Mr. Walgamott said the pricing was favorably received in recent consumer surveys. But he does not know whether Nordstrom Visa customers will run up balances like typical bankcard holders, or fit the profile of proprietary customers. Either way, he said, "it looks pretty positive" for Nordstrom.

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