New Credit Card Wars
Just when you thought your spending habits had exceeded all limits, here come more credit cards. If you’re a member of a frequent flyer program, you already know what I’m talking about.
Some airlines and at least one large hotel chain have been very busy lately, mailing out millions of applications for new “affinity” credit cards.
Now you can get a Continental Airlines MasterCard, an American Airlines Visa card, even a Holiday Inns Visa card.
The logo credit card war is on.
Texas Air fired the first shot. Last September, Continental and Eastern Airlines mailed applications for its special MasterCard to the 4 million members of the line’s frequent flyer programs. Anyone applying for the card would get a 2,500-mile bonus and would receive another 2,500-mile “activation” bonus for using it. After that it was a straight bonus-mile-per-dollar-purchased arrangement.
“Given the demographics of our frequent flyers,” says Jim O’Donnell, Continental’s vice president of marketing, “the banks came to us. They wanted these card holders.”
And a deal was cut. The bank, Marine Midland, pays Continental and Eastern for their mailing lists and solicits an upscale group of passengers with huge purchasing power. “Essentially,” says O’Donnell, “the bank is paying for the air miles distributed by us to our frequent fliers in return for our mailing list.”
Under the Continental/Eastern affinity card program, no finance charge is assessed if your credit card balance is paid within 30 days. And the program also offers free cards to spouses and family members. “We want to harness household spending power,” says O’Donnell.
There is no fee for the first six months; after that, it’s $36 a year. And if you decide to revolve your monthly credit balance, the interest rate is 18.95%.
‘Boost Enrollment’
Other airlines quickly followed. American Airlines is offering its new logo credit card to its 6 million Aadvantage program members, but is also beginning to market the card to passengers not yet Aadvantage members. “We expect that the affinity cards will boost enrollment in our frequent flyer program, as all card holders automatically become members,” says Steve McGregor, a spokesman for the airline.
“This is another way for our frequent fliers to accumulate more miles,” he said.
The annual fee for the card is $50 and the interest rate is 17.8%
The card comes with a credit limit between $2,000 and $50,000, and will accrue mileage credit for all your purchases. Your Aadvantage account receives 1,000 miles credit when you qualify for the card, and 1,500 miles when you make your first purchase. You automatically receive $350,000 in travel accident insurance and $1,250 in lost luggage insurance.
PSA is promoting its Visa card with a 17.9% interest rate. As with the other affinity cards, dollars spent on the PSA Visa card earn points with the airline’s frequent flyer program.
“There is an economic incentive for us to keep our frequent flyers happy,” says PSA spokesman Bill Hastings. “By giving bonus miles to the frequent flyer for using his Visa card, we are building product loyalty among those passengers who are, by definition, very important to us.”
To attract new card holders, PSA is giving 2,000 free bonus miles for signing up.
Piedmont airlines is offering two types of Visa cards. The first has a minimum $1,000 credit limit, $100,000 in trip accident insurance, $3,000 in rental car insurance, $1,000 in emergency cash and a travelers’ message service. The second, the Premier Visa card, has a minimum credit limit of $5,000, $500,000 in travel accident insurance and other goodies.
“If a person flies Piedmont a lot, it behooves them to use our Visa card,” says Leslie Rowland, Piedmont spokesperson. Piedmont Visa holders will earn one bonus mile for every dollar spent with the card. To get the Piedmont card you must be a member of its frequent flyer program. But membership in the Piedmont program doesn’t guarantee you a card, just an application. As with all the other logo credit card programs, you still need a good credit rating to get the card.
If these interest rates scare you, American Express may be able to help. American Express card holders are about to be offered the new Optima card with a 13.5% interest rate.
“A growing number of our card member base uses revolving credit,” says Phillip Riese, senior vice president of American Express. “And they told us they wanted that option with American Express. Optima gives it to them. Not only can they use it for packages and airlines but they can pay for hotels, meals and their whole vacation on a revolving credit basis. That’s how a lot of people afford their vacations every year. Now they can do it and pay less interest.”
But the card with the lowest interest rate is being offered by the American Society of Travel Agents. Through an ASTA travel agent you can pick up an application for an ASTA MasterCard. The card is issued by the Union National Bank of Arkansas.
The ASTA card has an annual interest rate of 10.56%. Card holders are eligible for travel accident insurance, a $3,000 rental car collision damage waiver and up to $1,000 reimbursement for lost luggage.
You won’t earn frequent flyer miles by paying for your airline tickets with the ASTA card, but you will save substantial interest charges, compared to most cards.
“There are plenty of credit card holders out there who are paying too much in interest,” says Taryn Moore, manager of marketing for ASTA. “This card is fair and convenient.”
ASTA’s MasterCard has an annual fee of $35, while the gold MasterCard--with a higher credit limit--is $45.
A First for Holiday
Holiday Inn offers a logo affinity charge card, the first in the lodging business. It’s called the Priority Club VISA card.
“We’re the largest hotel chain in the world and it makes a lot of sense for us to do this,” says Andrew Lien, Holiday Inn senior vice president for worldwide marketing.
“It’s a double-barreled benefit for us and the customer. The card is tied into the hotel’s frequent guest program. This Visa card gives the guests more and faster opportunities to accrue benefits. Holiday Inns has 1,600 hotels, but there are 4 million Visa service establishments around the world.”
Card holders earn valuable points when they stay at a Holiday Inn. They also earn points when they pay for anything, anywhere, using the card, even if it’s at another hotel.
“The best part of the Visa card,” says Lien, “is that you don’t have to change your buying behavior to get these benefits. It will lead toward a streamlining mentality. People will put all purchases on one card.”
Of course, there’s always the danger that people will start to overspend. After all, a lot of folks will look upon their new Visa and MasterCards as additional lines of credit, not as replacements for their current cards.
And therein lies the danger.
