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Issuers of retail credit cards sought to exit the business en masse during the downturn. Now the industry's appeal is on the rise, along with a dramatic improvement in its performance.
August 17
URL Keywords: Mercedes, American Express, cobranded, credit card, luxury cards
Links: http://www.americanbanker.com/issues/176_160/retail-private-label-credit-cards-mergers-acquisitions-1041283-1.html
American Express Co. and Mercedes-Benz USA have introduced a cobranded card with rewards tied to the luxury car brand, in the latest credit card industry effort to gain business from upscale consumers.
The companies on Monday unveiled two cobranded cards with annual fees of $95 and $475.
The less expensive card costs roughly the same annually as other new cobranded travel cards from Amex rivals, including JPMorgan Chase & Co. The more expensive card costs $25 more than Amex's basic platinum card, according to analysts.
The Mercedes cards' annual fees also stand out from the cobranded products of other rival luxury-car makers.
BMW of North America and Lexus USA each offer a cobranded Visa card through their own banks that carry no annual fee and provide rewards usable toward buying and leasing new vehicles and related merchandise.
"The fact that Amex is charging an annual fee suggests they are going after affluent and high net worth customers. And it makes a lot of sense, because Amex can fairly easily apply its infrastructure already in place for its cobranded travel cards to this product," says Brian Riley, senior research director with TowerGroup.
Bank of America Corp. previously issued a Mercedes-branded Visa credit card, but it discontinued that card last year, according to a BofA spokesperson.
Consumers opting for the basic Mercedes Amex card may earn five points per $1 spent at Mercedes dealerships, three points per $1 spent on gasoline, two points per $1 spent at restaurants and one point per $1 on all other purchases. Other rewards include a $500 certificate toward a new vehicle, 1,000 excess miles waived at the end of a car lease and a $50 annual reward certificate for Mercedes car accessories.
Platinum Mercedes Amex cardholders receive five points per $1 spent at Mercedes dealerships and one point per $1 on all other purchases; access to airport lounges and concierge service at certain hotels; a $200 airline credit; $1,000 toward a new vehicle; 2,000 miles waived at lease-end and a $100 annual certificate for Mercedes accessories.
Amex's cobranded Mercedes card likely will target a "narrower" group of potential customers than the no-annual-fee cards tied to other luxury car brands. In exchange, its rewards will be "a bit richer," says Scott Strumello, an associate with Auriemma Consulting Group.
"The only drawback here is the fact that while cobranded cards targeting upscale customers are a pretty hot segment, Amex is going after a group that is already being pursued by a lot of other issuers," he says. "By now, every luxury car owner probably has a lot of other options for similar cards, and winning them away is not a given."
