CardsFTW #67: When Did My Card Turn Into the Entertainment Book?

Plus, Late Fees, Cards for Influencers, and More

When Did My Card Turn Into the Entertainment Book?​​

Hughes & Sheila Potikern founded Entertainment in Detroit in the 1960s. They created a coupon book to drive business. The Entertainment book was sold directly to consumers and organizations for fundraisers. For $50, you could help a good cause, get coupons worth more than $50, and support small businesses.

We always had an Entertainment book around the house–we were big into saving money and fundraising growing up. Naturally, now an app, and basically doing the same model sixty years later. Without book printing, the annual fee is $34.99! Fundraising opportunities are still available!

When consumers think about rewards credit cards, they primarily focus on the points they earn when spending anywhere or in a specific category (accelerated earnings). I’m talking about the 1.5% cash back on all purchases and the 5% cash back on gas and groceries this quarter.

Many premium cards with annual fees include additional built-in benefits like airport lounge access, concert tickets, or restaurant concierges

Something many cards now include is a bunch of discounts. We like to use the fancy phrase “card-linked offers” to describe a discount, cashback bonus, or bonus points earned when you use your card at a specific merchant. Examples include Bank Amerideals or Chase Deals (powered by Cardlytics) or solutions from other offer providers like Kard, Dosh, or Augeo.

However, many of these card offers are starting to feel like the Entertainment Book: a bunch of unrelated, untargeted offers.

Case in point: the Apple Card.

Scroll It!

I came across these Apple Card Offers, which require you to use your Apple Card, Apple Pay, and a code! I think these are good brands (I do love a good orange cream slush or cherry limeade at Sonic), but there’s a lot going on here.

Card programs are stuck between providing lots of value and offering a clear, simple, relevant reward and earning structure. I think card brands would do well to focus on simplicity (fewer codes) and relevancy (accurate targeting or offers relevant to the card’s core value proposition).

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Late Fees

There is an extensive interview in a recent American Banker with CFPB Director Rohit Chopra. Along with many other topics, credit card late fees are discussed. Last week, I noted the CFPB’s fine of Bank of America around their behavior. The reality is late fees drive profits. At the same time, the government has good reason to believe that the cost of processing a late fee is less than the average fee charged. Synchrony’s CEO, Brian Doubles, noted in an interview with PaymentsDive that he expects the CFPB to “issue a final rule in the fourth quarter.”

The proposal, dating back to February, would “lower the immunity provision for late fees to $8 for a missed payment and end the automatic annual inflation adjustment.” The proposed rule would also ban late fees above 25% of the consumer’s required payment.

I’m all for fair fees, but banks react like a squeezed balloon when you squeeze profitability in one segment–they find another way. Free checking went away when we limited interchange income for large banks on debit cards. Some would argue limited interchange accrued back to consumers through lowered merchant prices, but either way, the banks get their money (be it from merchants or consumers). I expect the same will happen here–the CFPB can limit these fees, but we’ll see either other fees increase or rewards and benefits decrease.

Cards for Influencers

Karat, a card for influencers, announced a big fundraising round and details of a credit product that is hybrid consumer/commercial. The new Visa card may report payments to major credit bureaus on behalf of the creator but doesn’t require a hard credit pull for the initiation of the card, which acts like a small business card.

I am frequently asked about the credit bureau rules around when you have to do a hard inquiry and when you don’t. It used to be simple: if you wanted to offer and open a loan or line of credit, you had to do a hard pull first. These days that just isn’t true. We’ve seen secured cards like the OpenSky secured Visa that don’t require a hard inquiry and buy-now/pay-later loans like Affirm, which provide credit without a hard inquiry. If you know the real rules, please leave a comment.

There are a lot of interesting new business cards on the market, both credit and debit. Cards like Karat indicate a further blurring of the lines in today’s broader society that is reflected in our financial services.

Changes at Blue Ridge

The challenges in banking-as-a-service continue. Companies are selling on the cheap (Bond, Rize, Apto). Several sponsor banks have received consent orders for either their BAAS or other operations (Evolve, Cross River, Blue Ridge). Now the CEO and the President of the Fintech Division of Blue Ridge Bank have both resigned. Blue Ridge was very active in the past few years and issued many cards with Unit, but received a scathing consent order last year over its (lack of) oversight of fintech partners.

Changes are afoot, and all fintech sponsors would be wise to get ahead of this challenge.

CardsFTW

Thanks for reading CardsFTW, a debit and credit newsletter by Matthew Goldman. Matthew is the founder of Totavi, LLC, which provides GSD Product Consulting with real operational value. Visit totavi.com to learn more and engage us.

* Indicates a company with whom Matthew Goldman or Totavi, LLC has a financial relationship.

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