CardsFTW #55: Cheers to the Starbucks Card

Plus, a personal update and intrigue in the Capital One Walmart deal

Goodbye, Starbucks Visa Card

Last week Chase announced that it would discontinue the Starbucks® Rewards Visa® Card as of July 20, 2023. Consumers have not been able to apply for the card since last August. Current users will have their cards converted to Chase Freedom Unlimited, which offers a flat 1.5% cashback for no annual fee. (If users already have one of these, which they might, as it’s one of the most popular cards on the market, they will receive a Chase Freedom, which offers a rotating 5% cashback category.)

Starbucks Visa Credit Card
D. Barrett Strikes Again. Could have been Ariel Schultz

The Starbucks card could have been a better deal. It carried a $49 annual fee and earned 3 Stars per $1 spent at Starbucks, one-half Star for money spent at grocery, transit, internet, cable, and phone categories, and one-quarter Star everywhere else.

What is a Star worth? Starbucks recently changed redemption amounts in February, making many items more expensive. As a result, a Star might be worth anywhere from three cents per Star up to seven cents (and everything in between). Assuming a four-cent value, the Starbucks Visa earned 1% cashback everywhere, 2% at limited categories, and 12% at Starbucks. That sounds pretty good until you remember you can make two Stars per dollar at Starbucks WITHOUT the card if you preload your Starbucks gift/cash card in the app.

The credit card represented a lot of complication for the program in a place where people shop and earn every week if not every day.

I don’t have any insider knowledge, but I will assume the discontinuation is due to the low adoption of the product—time for some wild theories as to why.

Why does an airline or hotel card do so well, whereas this card did so poorly? The value is OK. 12% back is excellent! 1%, not so much, but that’s a fair baseline. I don’t think this has to do with the card itself but more about the category.

Travel cards are aspirational. Many other brands with cards are very emotional, such as sports teams, major retailers, etc. Some co-brands are very practical based on pure spending (e.g., I can spend $500 monthly at Amazon on their co-branded card.) Starbucks is not aspirational. It’s fast food. Starbucks may be emotional because it is habit-forming, but I’m not sure if people love Starbucks the way they love a sports team. Starbucks isn’t a huge spending category for most people. Even with a daily coffee habit, we’re looking at $120-150 monthly.

A co-brand in the fast food space, specifically a coffee shop with $3-4.00 items, is a hard sell. PLUS, Starbucks has a great loyalty program that consumers can combine with their existing credit cards. There are very limited opportunities for unique card perks that are major selling points, like the equivalent in travel of early boarding or a suite room upgrade. All these factors weigh on the Starbucks Visa not sticking around.

As I always say: credit cards are hard. Even Chase gets it wrong sometimes.

A Personal Update

Let’s take a quick break from our irregular programming.:I’m excited to share that I have embarked on a new professional chapter. I recently left Apto Payments at the end of March, following a 20-month stint at the company across several roles, including Chief Product Officer and President. As for what’s next, I plan to leverage my 20-plus years of experience in technology, startups, product, leadership, and fintech to help companies of all sizes build and enhance their products.

Totavi Logo

I’ve started a new consulting business called Totavi. There’s not much to the website just yet. If you’re looking for someone to help you select or build your fintech stack or at a bank or network looking to understand better how to compete against or work with fintech companies, I would love to help you out. You can reply to this email to let me know you want to talk.

Capital One and Walmart

My favorite Wall Street Journal author, AnnaMarie Andriotis, broke a story earlier this month that Walmart is suing Capital One over their co-brand credit card program. Wow, this is a big deal. Companies, especially big ones, try to work out their differences privately, so things must be in a bad place for a lawsuit.

Walmart Credit Card
The lawsuit may include accusing Capital One of failing to develop a clever card design or cardholder name. (Opportunity: Les Bucks)

Capital One replaced long-time Walmart card issuer Synchrony (nee, GE Money) in 2019. Synchrony had issued Walmart cards for more than 20 years across credit, debit, and prepaid options.

One of the significant challenges in retail credit cards is that there are opposing forces. On one side, retailers want to sell more products and engender deeper loyalty with their customer base, in this situation, by extending credit to those users. On the other side, banks want to manage risk, which is their primary role.

The conflict between these two comes into play when a consumer is offered credit at the store (for example, check-out credit offers) and the bank issuer declines the offer. Now, the retailer is presenting a negative experience to the consumer (even if the credit decline is well-justified). Retailers, especially Walmart, have experimented with turndown options. First, you apply for a network-branded card (say a Walmart Visa Credit Card). If you are declined but somewhat credit-worthy, you may be issued a store-branded closed-loop card (e.g., a Walmart credit card that is only Walmart stores accept). Finally, you may be offered a prepaid card if you are not issued credit.

The problem is, in all cases, you are telling the user “no.” The reality is that people seeking credit are not seeking a prepaid card, which is a poor substitute.

Retailers and banks spend a lot of time trying to get this balance right. Recent reports have indicated that Goldman Sachs has high losses due to the standards it has deployed for the Apple Card (which has a huge range of credit limits, reported to be from a low of $250 to $50,000 or more).

In addition to this upfront experience, the credit card issuer offers the website, customer service, and all other capabilities around the card itself in most situations. Consumers often blame the retailer (Walmart) when something goes wrong with the card (Capital One). Many things can and do go wrong: from fraud to bad customer service, credit reporting issues, and more.

From the outside, it sounds like all of these factors are at play and that from Walmart’s point of view, Capital One’s expansion into private label cards isn’t going well. From a personal experience standpoint, I had a Williams-Sonoma card issued by Comenity/ADP that transitioned to Capital One a few years back. The experience has been great! Williams-Sonoma is not Walmart, of course.

I can’t wait to read more about this dispute in the coming months.


Thanks for reading CardsFTW, an occasional newsletter about debit and credit. CardsFTW is written by Matthew Goldman, founder of Totavi, LLC, a boutique startup, product, and fintech consulting firm. Learn more about Matthew on LinkedIn or visit Contact me if you want to leverage 20 years of experience in building your next product.

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