U.S. college and university alumni-affiliated credit cards are losing steam because consumer interest in affinity-based college card programs is fading, new Federal Reserve Board data suggest.
Bank of America Corp., which became the gorilla of affinity cards in 2005 with its purchase of MBNA Corp., steadily is letting go of smaller and poorer-performing college-affiliated card-issuing agreements as they expire. And this is causing the industry’s total number of active college affinity credit card accounts to slowly decline, the data show.
But certain robust college affinity card programs continue to command issuers’ attention. BofA last year paid $4.3 million to retain its card agreement with Penn State University alumni, which have 70,000 open accounts, the largest among college affinity card programs, according to the Fed.
The Fed released the 2010 data this month, its second annual report on the category, as required by the Credit Card Accountability, Responsibility and Disclosure Act of 2009. The data do not include general-market credit cards college students may obtain.
The number of total open card accounts affiliated with colleges and alumni associations at the end of 2010 declined 15%, to 1.7 million from 2 million at the end of 2009. New accounts opened within the past year declined 16.7%, to 46,400 from 55,700.
BofA continues to dominate the market with 848, or 84.5%, of the 1,004 financial institutions with agreements to issue credit cards affiliated with colleges and universities or their alumni associations at the end of 2010, down 6.4% from 906 at the end of 2009. In a few cases, credit unions picked up smaller agreements BofA let expire.
BofA’s top 25 college affinity card programs accounted for about 32% of all such accounts the Fed tracked.
“The big issuers, particularly BofA, are clearly on the downswing with these cards,” Brian Riley, senior research director with TowerGroup, tells PaymentsSource. BofA has had a “cautious” card-acquisition strategy over the past few years to control risk during the economic downturn, he notes.
But BofA’s business model may no longer be ideal for marketing cards to hundreds of different college and university groups, Riley contends.
“A lot of the smaller organizations where BofA has affinity cards don’t fit its strategy, which is highly focused on a broad market with emphasis on a few major relationships,” he says.
BofA officials could not be reached for comment.
Issuers paid $73 million to college and university organizations to retain affinity card agreements in 2010, down 13.1% from $84 million paid the previous year, according to Fed data. That amounts to about $43 paid to organizations per open account last year.
U.S. Bancorp ranked second to BofA with 54 agreements in place at the end of 2010, down 10% from 60 a year earlier, followed by JPMorgan Chase & Co. with 28 agreements, down 22.2% from 36.
The total number of issuers with college-affiliated card agreements increased to 21 from 18, thanks to several credit unions entering the market and shifts among card-issuing entities within larger card-issuers’ subsidiaries.
BofA had 1.4 million open college-related affinity accounts at the end of 2010, down 12.5% from 1.6 million a year earlier. Chase ranked a distant second with 120,000 accounts, down 45% from 218,000, and U.S. Bank had nearly 49,000 accounts, down 59.8% from 122,000.
Along with BofA’s $4.3 million payments to Penn State, the Charlotte-based issuer made four of the top five highest annual payments to college organizations to continue issuing their affiliated credit cards, including University of Texas alumni ($2.4 million), University of Michigan alumni ($1.6 million) and the University of Southern California ($1.5 million). Chase ranked fifth, paying $1.4 million to retain the University of Tennessee-affiliated credit card.
Although Purdue Federal Credit Union’s total number of accounts is relatively small, the issuer added the most affinity card accounts last year, 2,642 that are affiliated with the Pursue University Alumni Association, bringing its total to 16,358 total accounts.
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