As part of a slew of new credit card rewards deals targeting affluent consumers, Capital One Financial Corp. on Aug. 23 rolled out what one analyst calls a “very rich” offer with a couple of interesting new twists.
The Capital One Cash card enables cardholders to earn a total of 1.5% cash back on purchases in any category, with no annual fee and no maximum limit on rewards. New customers also receive a one-time $100 bonus once they spend $500 during the first three months.
But unlike many recent entries in what has become a summer of hot deals for rewards card fans, Cap One’s latest program requires cardholders to stick around for a year after enrolling to capture the additional 50% of total cash rewards earned on the previous year’s spending.
The one-year commitment could be a powerful weapon for Cap One in battling the attrition plaguing the affluent card sector, where new and enriched rewards deals are rife as issuers pursue low-risk, high-spending customers, Megan Bramlette, a director with Auriemma Consulting Group, tells PaymentsSource.
“It’s a very rich offer, and requiring people to stay at least a year to get the maximum rewards will weed out the gamers–the people who come just for the introductory bonus points or miles that a lot of card offers dangle,” Bramlette says.
Based on Auriemma research that shows the average cardholder spends about $6,000 annually on a credit card, a typical new cardholder could expect to come out almost $200 ahead during the first year with the new card, she estimates.
“That’s better than a lot of deals out there, with no barriers to earning or redeeming,” Bramlette says.
Other perks include cash rewards that never expire and, like all other Cap One cards, it imposes no foreign-transaction fees.
Cap One’s new card comes during the same week American Express Co. announced a new cobranded Mercedes-Benz card with special perks designed to appeal to luxury drivers (
Cap One is targeting only prospects with “excellent” credit for its newest card, including “those who tend to pay their bills on time,” Celia Edwards, a Cap One vice president, tells PaymentsSource. She declines to say whether Cap One is specifically targeting “transactors,” or those who pay off their credit card balance in full each month.
But it is likely Cap One primarily wants to attract customers who do not routinely carry a balance. That would be similar to the strategies of other issuers that in recent months have trotted out richer rewards programs, Bramlette suggests.
“Issuers want cardholders who spend a lot and pay off their balances each month because they can earn money on interchange, while they have no stomach for taking on a lot of risk in this economy,” she says.
Cap One developed the new card in response to market research, Edwards says.
“Consumers told us they have a growing preference for cash rewards (versus points redeemable for travel or merchandise), and they wanted simplicity,” she says. “They also said they wanted someone to reward them for their loyalty.”
Some of Cap One’s existing customers, particularly holders of the Capital One No Hassle Rewards cash-back card, which earns 1% cash back on all purchases and 2% on gas and groceries, may want to switch to the new card, Edwards concedes.
Existing Cap One cardholders may call the issuer and request an upgrade to the new card after Sept. 7, she says.
Cap One is offering the card only as a MasterCard to new customers. Existing Cap One cardholders who switch to the Capital One Cash card will retain whichever brand they already have–Visa or MasterCard, Edwards says.
Cap One recently has been pushing MasterCard more heavily in direct mail and online offers, as MasterCard continues to try to close its market-share gap with Visa, observers say. Cap One for many years has supported both brands.
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