Barclaycard Ring was created based upon the belief that a simple product, that customers can trust, could change the current banking model. To that end, simplicity, fairness and transparency are tantamount to seeing that vision through. This blog and the community are our primary channel to deliver on the promise of transparency. The fairness and simplicity come through in the product design and how we set the policies for making decisions. I feel it’s always important to remind ourselves of the core tenets of Barclaycard Ring as we consider the vast world of credit card rewards.
We launched Barclaycard Ring without rewards because the focus was on simplicity and, rewards are not very simple. However, there was always a vision to build a rewards version of Barclaycard Ring. The challenge is how to do that in a very competitive and complex space. Rewards in today’s market have points with different values, activation bonuses, merchant category bonuses, caps, expiration dates, special deals with online malls and other features. Generally speaking, these constraints are intended to allow flexibility for issuers to market an attractive offers, like 5% back!!!, while minimizing costs. The idea is to use an effective marketing message to bring in the most accounts possible and to keep costs low on the backend. You can’t argue there is value in complexity. So, how will our simple more understated approach compete with the loud marketing messages? I don’t know. But we want to try.
I’m going to lay out two scenarios for consideration. I’ll discuss how these products would need to work with our Giveback™ program and how we would deal with current Barclaycard Ring members who might want the new product. Before I get into this, I want to thank all of our cardmembers for taking Barclaycard Ring without an acquisition incentive. We wanted to take the cost of the typical industry acquisition incentive (such as 0% for 15 months!!) and invest those funds in creating a better deal over the long term for our cardmembers. Still, we know activation bonuses are a nice incentive. Now there is one rule to keep in mind as I detail the products; no points. Point values can be manipulated and therefore are not transparent. Cash back statement credits are straight forward and that’s the route we’re going to go. So here are the proposed options for Barclaycard Ring products:
*The cash back rates are for all purchases all the time.
That’s about as simple as we can make it. The 8% rate is an aggressive long term variable APR relative to the market. We believe the 1.5% unlimited cash back on all purchases is as well. For cardmembers to earn more than 1.5% on their spending, this often involves using multiple cards for different types of spend (ie. One card for gas purchases; another card for groceries; etc.) and also frequently requires accessing websites for various deals or programs. A customer can also yield better than 8% variable APR if they continually look for 0% or low APR promotions new account offers. A cardholder with solid credit can continually beat 8% if they work at it. Keeping with our simple and transparent philosophy, we’ve outlined a long term rate that combines the best of all worlds (well, we like to think so).
With the Rewards Products 2, we realize the 1.5% doesn’t roll off the tongue. And that’s a problem. We added the 1% option to give customers a middle ground. Neither Rewards Product 1 (with12% variable APR and 1% cash back option) or the Rewards Product 2 (with 16% variable APR and 1.5% cash back), by themselves are leaders relative to other market offers. You will still see 2% and even 5% cash back offers in marketing materials for other credit card products that will look more attractive. However, people considering Barclaycard Ring may find they prefer the middle ground. A 12% variable APR is still a solid long term rate and 1% is easy to remember and a good deal.
Now onto the impacts to Giveback.
Because cardmembers with a cash back feature will already be getting value for spend, we feel that we need to adjust how Giveback would be allocated to individuals for each product. The table below is a very simplistic approach that we believe would be fair and reasonable.
With this scenario the people who have a 1.5% cash back rate would not receive any Giveback for their purchases. But they would receive twice the value for revolving balances than the 8% product group would have. While I’ll admit that Giveback is complicated this scenario seems the fairest and easiest method.
Last but not least, what happens if you already have Barclaycard Ring? How would you get one of the cash back products? Unfortunately, the short answer is you would have to apply for one. We could help streamline this process somewhat and we would lay out how to do that in the easiest manner possible. But the regulatory fact is that exchanging products in a manner compliant with applicable requirements (yes, legal added that phrase in, not me) would cost too much and take too long to implement.
I think the 1.5% cash back offer with the potential for more from Giveback could be a compelling offer in today’s marketplace. Potentially it could broaden the reach of Barclaycard Ring. However, we aren’t offering any immediate bonus incentives (ie. $100 cash back for the first $500 you spend, etc.)and this lack of ‘up front’ incentive as well as the lack of a higher cash back points for purchase categories create questions about the marketability of such a product.
Will potential customers see the value in this straightforward approach?
We would appreciate your feedback and any suggestions you may have for this program. We’d like to put our best foot forward in the rewards space while keeping in mind the simple, fair and transparent vision we’ve set out to realize.