Capital One Financial Corp. hopes to grab market share from other rewards-based credit cards with an unprecedented miles-match promotion whose timing may be strategically calculated to take advantage of turmoil surrounding proposed new debit card regulations, one analyst contends.
Cap One on March 10 announced the “Match My Miles Challenge,” in which it promises to match up to 100,000 miles in existing airline credit card rewards programs for new customers of its Capital One 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 Cap One waives the first year.
The miles-matching program ends May 13 or when Cap One reaches a maximum of 1 billion matched miles. Approved cardholders’ existing miles in other mileage programs are unaffected.
A 30-second TV spot starring actor Alec Baldwin breaks March 10 touting the promotion and Cap One’s Venture Card, which boasts double miles, or two points for every dollar spent, and the opportunity to fly free on any airline, anytime, with no blackout dates or restrictions.
The promotion, which Cap One says represents an $1,100 value, is “among the richest we’ve seen lately,” Megan Bramlette, director of knowledge management at Auriemma Consulting Group, tells PaymentsSource. It also underscores Cap One’s new emphasis in targeting more-upscale customers, as all card issuers increasingly gravitate toward heavier-spending, less-risky customers, she says.
“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 says. Cap One on its website says the offer is for customers with “excellent” credit.
Despite its relatively generous offer, Cap One’s latest promotion may appeal only to a relatively narrow group of customers, Bramlette warns.
Airline rewards credit cards today account for about 11% of all rewards cards, down from a high “approaching 20%” several years ago, Bramlette estimates. “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 these days because of high travel costs, Bramlette says.
“Consumers have showed a preference for cash-back rewards, but this promotion provides a solid value to anyone who might travel,” Bramlette says, noting “consumers generally are less and less loyal to airlines; they are looking for any seat offering the best deal.”
Another analyst believes Cap One, which has a relatively low share of debit cards compared with its rivals among the nation’s top five credit card issuers, strategically timed its offer to take advantage of uncertainty surrounding debit card interchange regulations.
The Federal Reserve Board has proposed new rules that would cap debit interchange at 12 cents per transaction, which is causing some debit card issuers to rethink their debit-rewards programs (
The Fed expects to issue final rules late next month, although some lawmakers are said to be drafting legislation that would delay or change the proposed rules (
Cap One is in an unusual position to move aggressively in offering a new credit card rewards program because it has less to lose in “shaking up” the relative value of its credit and debit-rewards programs, Brian Riley, senior research director at TowerGroup, theorizes.
“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 explains. “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.”
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