Visa scored a significant win in the battle for affluent credit cardholders in its recent deal to become the exclusive brand for all new cobranded credit cards for United Continental Holdings Inc., the airline born from the merger of United Airlines and Continental Airlines, analysts say.
All new United Continental credit cards issued after Jan. 1 will carry only the Visa brand, the companies recently disclosed, bumping MasterCard out of what analysts say is a plum source of affluent cardholders who spend more each month than general credit cardholders.
JPMorgan Chase & Co. continues as the issuer of both United and Continental cobranded credit cards, which include cards carrying both Visa and MasterCard-branded cards, a Chase spokesperson confirms.
Chase is merging the two card portfolios into a single entity under United’s MileagePlus rewards-program banner, but existing cards will retain their brands, a Chase spokesperson tells PaymentsSource via email.
“After the loyalty programs merge, Continental credit card cardmembers will be automatically migrated to cards with the United MileagePlus names,” the spokesperson explained. “That said, existing MasterCards will remain MasterCards, and cardmembers will retain their existing account number and network.”
A MasterCard spokesperson says the company will continue to service existing MasterCards in Chase’s United and Continental cobranded airline card programs.
“We were recently informed of the network branding decision for the new United co-brand credit card portfolio,” the spokesperson tells PaymentsSource via email. “While disappointed by this decision, we will continue to work with Chase and United to provide the current MasterCard cardholders the same level of service, access, experiences and convenience they enjoy today.”
Visa expects to see positive benefits from the change.
Joseph Saunders, Visa chairman and CEO, told analysts July 27 during a quarter conference call to discuss second-quarter earnings that Visa expects to see more affluent customers and higher purchase volume as a result of the switch.
“An important aspect of this major co-brand program is the proportionally larger number of affluent card carriers and the greater cost order volume uses associated with Mileage Plus Visa card, both big benefits to Visa's overall growth,” Saunders said.
Cobranded airline rewards cards, long known to be popular among frequent travelers who tend to be affluent, are generally a boon to issuers, certain analysts contend.
“These are high-performing portfolios,” Megan Bramlette, director at Auriemma Consulting Group, tells PaymentsSource.
Auriemma research, based on its ongoing monthly survey of credit card customers, shows that credit cardholders typically spend more on cobranded airline cards than what is spent monthly on all credit cards. Airline cardholders spend an average of $635 per month, 47.3% more than the $431 consumers typically spend on average per month on credit cards.
Only cobranded hotel credit cards generate higher average monthly cardholder spending, at $662 per month, Auriemma data show.
Airline credit cardholders also use their cards more, cards out of their wallets 14.6 times per month compared with 13.7 times per month for all cardholders. The survey was of 2,652 credit card users from the fourth quarter of 2010 to the first quarter of 2011.
The average annual individual income for cobranded airline credit cardholders is also significantly higher, at $62,249, compared with $55,470 for all credit cardholders in Auriemma’s sample.
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