With its announcement today of the new Disney Rewards Visa Debit Card, which carries a $25 annual fee, JPMorgan Chase & Co. appears to be expanding its rewards-at-a-price strategy for cardholders. And the new card’s terms also suggest the issuer is determined to continue pushing consumers toward signature debit, which tends to reap higher interchange revenue compared with PIN-debit purchases.
Chase checking account customers who apply for the Disney Rewards Visa Debit Card may earn one reward point equal to $1 per $200 spent in signature-debit transactions. Chase will give new cardholders 25 points for their first five qualifying debit card purchases during the first year. Cardholders can use points toward Disney theme park passes, hotel stays, meals, movies, toys, music and books. Other perks include a free photo opportunity with a Disney character at a Disney resort and 10% off Disney Store merchandise purchases of at least $50 when using their card.
By comparison, Disney and Chase in 2003 introduced the Disney Rewards Visa credit card, which carries no annual fee and enables cardholders to earn one reward point per $100 in net purchases, redeemable toward Disney merchandise and services. The higher earning rate is because credit card interchange rates generally are higher than those applied to signature-debit and PIN-debit purchases.
Chase’s new Disney debit card is its first annual fee-based debit rewards card broadly targeting families, but it is not the issuer’s first foray into charging an annual fee for debit rewards.
Within the past few years, Chase has introduced two cobranded debit-rewards programs each with United Airlines and Continental Airlines. Both programs enable cardholders to earn miles for signature-debit transactions using two different tiers; annual fees are $25 and $65 respectively. Chase also provides the Chase Business Debit Card with Leisure Rewards, enabling cardholders to earn four points per dollar spent using their signatures. Chase charges $25 per year for the card.
The issuer’s latest product underscores card issuers’ need to continue providing incentives to drive customers toward signature-debit transactions, which are incrementally more lucrative. Last year, PIN-debit transaction volume grew at four times the rate of signature debit, according to the 2009 Debit Issuer Study that Discover Financial Service’s Pulse PIN-debit network commissioned and released last June. But issuers surveyed for the study predicted PIN-debit and signature-debit volume this year would grow at the same rate, 7%.
One analyst says that Chase’s strategy of charging customers an annual fee for richer rewards, including on debit cards, seems to be working.
“Over the last year, Chase has announced several initiatives aimed at broadening and diversifying its rewards programs,” Scott Strumello, an associate with Auriemma Consulting Group, tells PaymentsSource. “Chase’s goal seems to be expanding rewards options for more consumers on more types of products, including checking accounts, so that customers will stick around. As customers get more deeply invested in rewards programs for everyday banking transactions, they are less likely to switch banks.”
Disney is a “powerful partner” that is likely to help Chase attract the sought-after demographic of younger adults with families, Strumello says.
