Here’s a story about UK rewards programs that is directly in line with Mercator’s recent note on the sustainability of reward programs. In that note, Mercator points out the limited lifetime of rewards. Issuers just cant keep throwing 60,000-100,000 reward points at new users. The business model can’t afford the cost, so if you desire to sustain the strategy, you will either have to increase costs for the targeted segment or push the expenses to the mass market. There is no other option. Someone either (or some segment) covers the expense or you must accept lower returns from the business.
This is where the article gets interesting.
• MBNA has confirmed that it is to close two of its American Express rewards credit cards.
• The MBNA Rewards Credit Card and the MBNA Credit Card with Cashback – which have been shut off to new customers since 2015 – will be closed for good from 22 September.
• All cardholders will be sent a replacement Visa card, though spending on these cards will not accrue rewards.
• These MBNA cards are not the first rewards cards to be closed or amended. Earlier this summer Barclaycard announced it was stopping its American Express cashback card, replacing it with a Visa paying half the rate of cashback, while recent years have seen a host of cashback and rewards cards scrapped.
In a case of “man bites dog”, it is not all cards that are affected. Interchange rate decreases do not affect cards directly issued by American Express. It only affects those cards issued by banks for cards with American Express co-branded on the card.
• It’s important to note that not all card providers are hit by this fee cap – American Express is exempt, though this only counts for American Express cards actually issued by American Express.
• If your Amex comes from another card provider, it won’t be exempt, hence the changes to MBNA’s Amex cards.
Short ending: If you want an American Express card, it is best to deal directly with the company; if you want an American Express card issued through a bank such as MBNA or Bank of America, you might be better off to “leave home without it”.
Overview by Brian Riley, Director, Credit Advisory Service at Mercator Advisory Group
Read the full story here