PacBell Cancels Co-Branded Card
Just a year after its introduction, Pacific Bell hung up on its Savings Card, a credit card issued by Household Bank.
Experts said that the cancellation is the latest example of the decline in co-branded credit cards--cards that offer rebates, discounts, points and other perks--jointly sponsored by a bank and a company. Although cards linked to airline mileage programs have had runaway success, efforts to use the formula for other industries and products have often been disappointing.
The Pacific Bell Savings Card offered a 1% rebate on purchases and a 10% savings on calls made with the phone card. Rebates on purchases made before Nov. 1 can be applied to phone and credit card bills until February 1998.
Household Bank, a division of Household International, which managed the card for Pacific Bell, will issue replacement credit cards to the 230,000 existing customers in January 1998. In an effort to retain those customers, Household Bank has dropped its interest rate from prime rate plus 9.9% (currently 18.4%) to prime plus 7.4% (currently 15.9%) this month and added new travel-related benefits.
Household Bank handles many co-branded cards, including the popular General Motors card, which last year lowered caps on the rebate program. Co-branded and affinity cards make up 75% of the bank’s credit cards, representatives said.
Both parties declined to comment on the reasons for the termination of Pacific Bell’s card. Credit card industry analysts speculated that Pacific Bell is following the lead of SBC Communications, which bought its fellow Baby Bell in April. SBC’s Southwestern Bell division ended its popular credit card program in December 1996 after the program incurred heavy losses, said Jim Shanahan, a partner at Business Dynamics, a Nyack, N.Y.-based consulting firm.
The move reflects a change in the marketplace. “Co-branding got going in 1992, with the success of the GM card. Doing the deal became more important than the deal itself,” said Robert McKinley, president of RAM Research, a newsletter in Frederick, Md., that tracks the credit card industry. “Now the trend has run out of steam.”
Intense competition and high-priced incentive programs have cooled the ardor of many companies. Ford, General Electric Credit, Blockbuster and other companies have cut benefits or scrapped their co-branded cards in the last year. Also, a higher percentage of customers pay off co-branded cards in full every month compared with other credit cards.
