In November of last year we let Barclaycard Ring cardmembers in on the fact that we were about to test a 0% introductory APR offer in the mail. The introductory period was for 12 months with an ongoing variable APR of 10%. The offer was a philosophical leap from the normally marketed 8% variable APR offer that has been our staple since launch in April 2012, and so we felt opening a discussion about the test was important. We received very insightful feedback from the community and the energy around the idea was greatly appreciated.
The test mailed on December 12th of last year and the initial results are almost in (97% of the way in - at the time of my writing - to be exact). Without further ado here is a graph that reveals the results not only of the total response but also the dollars of balance transfers that came along with the applications.
What the chart shows is that we received 7 percent more accounts through the 0% introductory rate offer. In addition, of the accounts we did get through each offer, we saw 34 percent more of the cardmembers request a balance transfer. Those transfers were on average 3 percent higher than the 8% variable APR balance transfers leading to a total increase in balance transfers per account of 37 percent.
Does that mean 0% is the winner?
While the results favor the 0% introductory offer, the jury (or the data in this case) is still out on which offer won. There are two large unknowns we still need to observe. The first is how much of the balances will be paid off once the introductory period ends. There is a reasonable chance that the 37 percent lift will all disappear by the 13th month, in which case this offer will cost more money.
The second unknown is the ongoing engagement cardmembers will have with the card. Said another way, will people use the card for something other than balance transfers? More balance transfers take up additional credit line, which result in people actually using the card less for purchasing. Less frequent purchasing also means lower overall profits for Barclaycard Ring.
In order to determine the ultimate “winner” of the test, we need to see how many of the higher balances are paid off once the introductory period is over and also if these new accounts are using the card to make purchases. But there are a few other factors that we also consider.
The timing of bank’s return on investment is also better when not offering a 0% introductory rate product. And being different in the market is also a factor. The fact that the current Barclaycard Ring 8% variable APR products stand apart from the rest of our competitors is also important.
At this point the lifts we saw are not enough to determine that the 0% introductory offer is the better offer. Therefore we are staying the course with the 8% variable rate offer and will read more results of the test toward the middle of the year.
Please let me know if you have any questions and I’ll be happy to answer them.
On December 16, 2015 the Federal Reserve made a decision to increase the current Prime Rate by .25%. These changes will affect the current variable APR for Barclaycard Ring cardmembers and may also impact your minimum payment due. See our Prime Rate FAQs blog for additional information about these changes.