Ford, Citibank to End Rebates for Purchases
In the latest sign of retrenchment in the war for credit cardholders, Ford Motor Co. and Citibank on Monday said that they will discontinue rebates for vehicle purchases or leases.
In a letter to cardholders last week, Ford and Citibank also said they will stop awarding rebates on card purchases of Texaco gasoline and Hertz rental cars. The programs will end Jan. 1.
With customers cashing in at a rapidly rising pace, it was clear that Ford found the offers too costly.
With the exception of airline frequent-flier cards, several credit card issuers are reconsidering the special deals and rebates they are handing out to cardholders as an enticement to use the card.
Some are imposing fees, or considering them, for services that were previously free.
In September, General Motors Corp. cut in half the rebates for GM vehicles that its 12 million Gold Card customers could earn, and said they could no longer earn rebates at Mobil gasoline stations, Marriott hotels or by making telephone calls through MCI Communications Corp.
In the same month, GE Capital Corp. started charging a $25 annual fee to cardholders who routinely pay off their Rewards MasterCard. GE Capital said the fee was necessary to cover cardholders who take advantage of cash rebates of up to $140 a year without paying interest on balances carried over from month to month.
Issuers have piled on incentive programs in the last few years in a bid to grab market share in a fiercely competitive industry. But some, like Ford, have been forced to review that strategy.
Currently, every dollar spent on the Citibank Ford Visa or MasterCard earns the holder 5 cents in rebates. Rebates are limited to $700 a year, or $3,500 over five years, with minimum rebates set at $50.
Ford launched the credit card in February 1993. Last year, it estimated that the Citibank rebate program, plus similar programs in Canada and Britain, could have cost it $4.1 billion if all cardholders had redeemed them.
“We think we can use these resources more effectively, rather than in this program, [which] . . . limits us somewhat,” said Ford spokeswoman Joy Wolfe.
Under the new rules, outstanding rebates will be good for five years from the year they were earned for consumers who keep their credit card.
Brittain Associates Inc., a credit card research firm in Atlanta, put the number of Citibank Ford cards at about 4.5 million in April, and said that number had not grown since September 1995.
But even as the number of cards outstanding failed to grow, the amount of rebates rose sharply, said Karen Wimmer, a research analyst at Brittain.
“Ford claimed in January 1995 that 71,000 card owners had received car rebates,” Wimmer said. “When we measured it just this past April, about 27 months later, we found that about 460,000 had redeemed the rebate.” Of that number, 70,000 were Ford sales that would not have occurred without the card rebate program, Brittain said.
