In spite of the stuttering economic recovery, leading U.S. card issuers appear united in their belief that there is significant growth potential in small business cards. Given the anemic small business loan demand as well as continued strict underwriting standards from issuers, issuer focus continues to be on driving small business spending rather than outstandings. This is illustrated most clearly in the bonus points/miles/cashback offers for making initial purchases on new cards as well as for signing up for a number of services.
- Chase is offering bonuses on each of its three Chase Ink cards: up to $250 on Ink Cash; up to 25,000 bonus points on Ink Classic; and up to 50,000 points on its Ink Bold charge card.
- Capital One has professed that it does not typically compete with strong bonus offers or introductory rates, but it is offering 10,000 miles on the Spark Miles credit card. This card is targeted at heavy spenders, and features an earn rate of two miles per dollar, but it also carries an annual fee of $59. Capital One is also offering 30,000 points for customers who sign up for Capital One Personal Checking account, Small Business Rewards Checking account and Spark Business credit card.
- SunTrust is offering 25,000 points on its Delta SkyMiles Business Check Card. This card has a rewards earn rate of 1 mile per 2 dollars, and comes with a $120 annual fee.
- Citibank, who pulled back significantly from the small business space between 2008 and 2010, recently launched the CitiBusiness ThankYou Card, featuring 15,000 bonus ThankYou Points after spending $3,000 in the first 3 months.
These offers can be effective in driving new small business cardholder and acquisition. However, to optimize customer lifetime value, issuers also need to develop initiatives that anticipate and capture opportunities at various stages of the customer lifecycle. These initiatives include onboarding campaigns, anniversary communications and offers, ongoing usage incentives, upsell and cross-sell initiatives, winback programs and referral offers.
Capital One recently launched Spark Business, a suite of six small business credit cards. This represents a radical overhaul of the Capital One small business credit card portfolio, with the six new Spark Business cards replacing the existing five cards.
In launching Spark Business, Capital One is following the lead of Chase, which in 2009 replaced its small business card product range with the Ink portfolio. Like Chase, the launch of Spark Business enables Capital One to concentrate its marketing on one brand.
Other interesting aspects of the Spark Business launch:
- One of the cards–Spark Miles–is a small business version of its well-known Venture Rewards card, featuring two miles per dollar on all spending with no limits, and an annual fee of $59. There is also a cash back version of this card, called Spark Cash
- In an earlier blog, we highlighted the fact that many small business card issuers are offering large bonuses to drive small business credit card spending. Capital One is no exception to this, with Spark Miles offering a bonus of up to 15,000 miles, and Spark Cash promoting up to $150 cash back
- All of the Spark products have no foreign transaction fees. This is a standout feature, as most other issuers only eliminate foreign transaction fees on their high-end cards
- All of the Spark Business products offers card personalization options and free employee cards
In July, EMI posted a blog on leading small business credit card issuers making large bonus point offers to encourage small business customers to activate and continue to spend on their business cards. Some of these leading small business card issuers are turning their attention to revamping rewards structures for their leading cards. Yesterday, Bank of America announced the introduction of a new version of its Cash Rewards for Business MasterCard. It has added 2% cash back on spending at restaurants, in addition to the previous rewards of 3% on purchases at office supplies, gas and computer network services, as well as 1% on other purchases.
Other issuers that have enhanced their small business rewards card programs include:
- Capital One: launched the No Hassle Cash Premier Card, featuring 2% cash back, as well as a bonus of up to $150 (this card does come with a $59 annual fee)
- American Express: introduced a new version of its Business Gold Rewards Card, with triple points on airfare, double points on advertising, gas and shipping, and 1 point per dollar on everything else. It previously offered a flat 1 point per dollar reward. The card also features a 50,000 point bonus (for spending $10,000 on the card within the first 150 days). The annual fee for this card has risen from $125 to $175 (both American Express and Capital One are evidently betting that small businesses will be willing to pay an annual fee in exchange for these higher rewards)
- Chase: launched new earnings structures for Chase Ink Classic and Ink Cash: 5 points per dollar/5% cash back on first $25,000 in annual spend on office supplies, telecommunication services and cable services; 2 points per dollar/2% cash back on first $25,000 in annual spend on fuel and lodging; and 1 point per dollar/1% on all other purchase
The growth of bonus offers and bonus rewards illustrates the extent to which the leading small business credit card issuers are competing to capture a share of small business card spending. There is significant growth potential in this market, as cards still account for a small share of overall small business spending.
And there are recent signs of life in the overall small business card market, which has been in the doldrums since the start of financial crisis. Last week, American Banker reported on FDIC data that shows big banks starting to grow loans of $100,000 of less (which are largely made up of small business cards).