CardsFTW #35: Walgreens’ New Wellness Card

Plus, Chase Sapphire updates, business travel cards, stock ownership cards, and more

I’m back after a brief but unintentional break. Some exciting developments on my end that I look forward to being able to share soon. I will try to get back into a weekly writing rhythm as the volume has piled up. As a result, you’ll have to pardon a few thoughts on older news items.

Walgreens Wellness Play

In April (Cards FTW #23), I covered the news that Walgreens was planning to launch a co-branded credit card (they are also launching a co-branded debit card). This week, Walgreens announced the myWalgreens Credit Card launch, which Synchrony Bank will issue on the Mastercard network.

myWalgreens Card
I’m not sure about putting the Mastercard mark top right. Cardholder name: Wally Green

Drug stores have not traditionally offered co-branded cards. They were the first retailers to sell reloadable prepaid debit cards (primarily with Green Dot) in the early 2000s, but these were not co-branded. Over the years, drug retailers have continually upgraded their loyalty programs. They are some of the largest retailers by location count, with more than 9,200 Walgreens locations.

The Walgreens card emphasizes wellness in its program (as you might expect from the brand) and will soon face competition in the wellness card space from startups like Paceline (and others, which are as-of-yet unannounced). The card has deep integration to the point-of-sale and loyalty program. It will earn 10% cashback on Walgreens branded items, 5% back on Walgreens store and pharmacy purchases, 3% at grocery stores, health providers, and wellness purchases, and 1% cash back everywhere else. If you frequently shop at Walgreens or have a lot of medical spending, that is a pretty strong offering, although cardholders must spend all cashback at Walgreens. I’m not aware of any other card on the market today with an accelerated cashback rate for doctor visits.

The reward category definitions appear in the terms to be relatively expansive. Grocery purchases include grocery, bakery, delicatessen, and wholesale clubs (although Costco does not accept Mastercard cards in-store). I cannot find a clear MCC-based definition of what wellness is, however.

Overall, I’m impressed with the rewards program, but I am not convinced there are enough true fans of Walgreens to make this work. Adding a new card to your wallet is a significant event for most consumers, and the trade-off here may not be worth it. There is a minimal sign-up bonus of $25, which is unlikely to move the needle in a world where banks offer prime customers hundreds of dollars to acquire a new card.

Chase Sapphire Updates

Chase is rolling out a variety of updates on its Chase Sapphire line. The Reserve line is coming up on its fifth anniversary, and many users who originally acquired the card in the fall of 2016 will be in for a shock as their annual fee increases to $550 (from $450) this year. It’s certainly making me question its value. For the top-of-the-line Reserve, new points earning capabilities are limited to travel and dining purchases through Chase’s portal (versus directly with the merchant). There are several new benefits for the lower-cost Sapphire Preferred card, including a 50% increase for restaurants (3x from 2x), plus 3x at streaming and grocery. Users of Preferred cards receive 17% less value per point than Reserve members. Doing the math on which card is better is complicated. From the outside, it appears to be a shift to add value more to the Preferred card, rather than to Reserve. For many consumers the Preferred is likely a better fit for their spending patterns.

New Chase Sapphire Preferred Design
Sara Phire

High-end travel cards are under pressure. Recent studies find that consumers are increasingly turning to buy-now-pay-later solutions (76% across all populations, but 84% of younger consumers report wanting to spend less on credit cards).

At the same time, coming out of the pandemic, credit card applications are up. The Consumer Financial Protection Bureau reported that applications for revolving credit cards have returned to pre-pandemic levels by May of this year. American Express said in its earnings calls that spending on cards by millennials is up 30% compared to 2019.

The Chase Sapphire line holds a strong position in the broader market, and loyal consumers will benefit from these changes. All major card issuers, including Chase, offer various cards to serve different segments, and the travel rewards segment will continue.

Business Travel Cards

Recent news on business cards has centered around newer entrants like Brex, Ramp, Rho, and others. Several entrants focus on sub-segments, such as marketing or ad-focused corporate cards like FunnelDash and Trust. Don’t count the traditional providers out, however. Bank of America announced its new Executive Explorer Visa card for high-end business travelers.

Executive Explorer Card
Ritchie Rich?

The card has everything you expect for a top-tier travel card, including a metal core, a black card design, and many perks. Rather than build a lounge network like Chase or American Express, or send you yet another Priority Pass, cardmembers receive a $600 annual lounge access credit that cardholders can use at various airport lounges. There is a $100 statement credit per four years toward programs like PreCheck or Global Entry, lots of insurance, full chip-and-PIN, and a $375 annual fee.

This card isn’t for casual cardholders; it is designed for companies with large corporate relationships with Bank of America. It is interesting to see the card’s focus on benefits and services (such as very high-end lost luggage replacement) instead of 3 points here and 4 points there.

Investing, Meet Spending

On the other end of the spectrum, challenger bank and lending startup M1 announced its upcoming credit card program. The Owner’s Rewards Card focuses on connecting M1’s investment products with this new credit card product. Cardmembers will earn up to 10% cashback at select companies when they own stock of the same company in their investment account. Sixteen companies are eligible for the top 10% reward category from Adobe to Tesla. Other companies are at lower tiers like Starbucks (5%), Apple (2.5%), and 1.5% cash back everywhere else. Cardholders can choose to invest their rewards into their portfolio automatically.

The card will be issued by Celtic Bank and powered by Deserve’s credit-cards-as-a-service platform. It doesn’t appear that the card has a fee, but cardholders must be M1 Plus members, which has a $125 annual fee.

I love this concept and how it ties together different parts of the consumer’s financial portfolio. M1 is a late-stage startup with lots of customers and lots of funding. They should have a deep bench of existing consumers to work with to provide growth to the program.

Cards & Crypto

The tie-in between credit cards and cryptography has been growing tremendously over the past year and is something I have written about extensively. It’s accelerating to the point that a round-up is required for news from the past few weeks.

Venmo announced it will allow its credit cardholders to buy cryptocurrencies with their cashback automatically. Upgrade opened applications for its new bitcoin rewards card. The card has no annual fee and a simple 1.5% cashback (to crypto) value proposition.

Meanwhile, BlockFi is advertising its new credit card, and more are on the way, with SALT announcing its plans to launch a credit card that is backed (secured) by your crypto assets, regardless of your credit score.

News Updates

A few quick updates to round out this edition:

Giant Eagle supermarkets announced they will accept PayPal and Venmo at checkout (not with a card). The process involves scanning QR codes, approving in wallets, etc. What a great example of why cards are superior. Just tap or dip and move on.

Sequin, which initially announced plans to launch a credit card for women, announced a new credit builder debit card product. I am a big fan of what the Sequin team is doing here. Along with their other startups in the space, helping consumers develop strong credit habits and scores is a worthwhile pursuit. Some other companies to watch in the space include Grow Credit and Extra.

Marqeta announced it will power a new virtual card for Google Pay. I’m a bit lost on all of the Google cards, but there will be lots of demand given their scale.

As always, there is a lot of news in cards, and I’m looking forward to sharing it all with you!

CardsFTW

Thanks for reading CardsFTW, a weekly-ish newsletter about all things debit and credit. CardsFTW is written and curated by Matthew Goldman, Founder, and CEO at Vertical Finance, a challenger credit card startup. If you’re looking for insights into everyday payments beyond deal blogs, please subscribe for free at cardsftw.substack.com. If you enjoyed this, please share it with a friend! Follow me on Twitter @magoldman.

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