Kristin Moyer

Card issuers have taken swift action to stem credit losses and deal with changing legislation.  They have proactively shut some cards down, they have lowered credit limits on others.  They have raised interest rates in anticipation of new legislation.  Cardholders aren’t thrilled:

• 32% of cardholders have paid off and closed an account since January 2008
• Half of those that closed their account did so because of new policies such as adding fees, lowering credit limits or raising interest rates.

Moving forward, issuing strategies must change for banks to be profitable and consumers to be more satisfied.  At one end of the continuum is high volume, low differentiated products – for example, airline miles per dollar spent.  I would even include programs that increase rewards per the number of products you hold with the bank in this category.  This has been the predominant model in the industry to date.  As for me, these products are fine as long as there are no annual fees.  With an annual fee involved, not interested – and the general cardholder population seems to be saying the say thing given recent studies.

On the other end of the continuum is segmentation, including lower volume, highly differentiated products.  The PNC Virtual Wallet Student is an example.  It sends a text message or e-mail to students and parents if there is a risk of overdrawing or if the account goes below a pre-defined level, parents can transfer money to the student’s account through a Send Money feature and other features.  Ink from Chase is another example – small business cards with options to full pay, split pay, pay down balances faster , track business spending patterns and other features.

At first glance, credit losses and changing regulation seem like a millstone around the neck.  At second glance, they may push the industry to specialization and segmentation that draws consumers back.