One from Amex Tries to Save for Loyalty
By John Hennessy
American Express has launched a new card called One from American Express. The unique feature of the card is that consumers will save automatically with every purchase.
America Express will contribute 1% of the cardmember’s purchases into an FDIC-insured, high yield savings account (currently 3.15%). Cardmembers can also contribute their own funds to this savings account.
According to Peggy Maher, senior vice president and general manager, Consumer Charge Card, American Express, “One from American Express is a new card for consumers focused not only on spending for today but also building savings for their future.”
Ms. Maher continues, “If you think about all the expenses a typical family has today, it’s easy to see how quickly a little savings can add up just by using the card.”
Consumers can select to carry a balance on larger purchases while paying off other purchases monthly to avoid finance charges on those purchases.
Some of the other benefits of One are:
- Online account management,
- Purchase Protection,
- Buyer’s assurance warranty extension,
- Return Protection, and
- Car Rental Loss and Damage Insurance.
In year one, the $35 annual fee is waived and a $25 bonus contribution will be made to the cardholders savings account upon the first purchase.
Moderator’s Comment: Is there any long-term loyalty benefit from a program that entices with favorable year-one terms only to turn the tables on the
benefit possession arrow in subsequent years?
I continue to be surprised, in a sad way, by how many customers are naïve about their finances.
The year-one benefits for those using the One card and who do not carry a balance are attractive. Customers who stick around for year two and subsequent
years, however, are less likely to realize any high yield savings account benefits. The $35 annual fee and interest fees on unpaid balances will eat up any accumulated savings
for many cardholders.
If all One card cardholders charged more than $3,500 per year to cover the annual fee, and paid off their balance every month to retain the savings they
earned on their spending, the card would probably not make a lot of financial sense for American Express. American Express appears to banking on this program being a losing proposition
for cardholders. –
John Hennessy – Moderator
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9 Comments on "One from Amex Tries to Save for Loyalty"
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Cards that provide credits for expenditures charged have been available from various providers (including Visa and Discover), and new offers appear regularly. Savvy card users move quickly from one to another when benefit limits expire. I believe that this new Amex offering will most likely be a success, as it provides credits and free membership. I do not see a long-term loyalty benefit. The best “loyalty” device Amex offers is its membership awards program, and that is not mentioned in the article. The biggest benefit I see for Amex is increasing and cleaning its customer lists, gaining additional information for its databases.
This can be very profitable for American Express if they carefully select who gets the offer. For example, if the solicitation goes to Discover card enthusiasts, particularly those who run loan balances, this will take market share from a competitor and make a decent profit, assuming the loan balance interest rate is high enough, and the credit scores are high enough to avoid greater-than-average write-offs. Almost certainly American Express will increase the retailers’ fees to help pay the rebates, and people who run balances won’t be able to dump the cards after a year, so they’ll pay the $35 annual fee for years to come. Visa, MasterCard and American Express all want to give rebates to take market share from Discover, the rebate originator. It will cost the Big 3 nothing, since they’ll get the funds by increasing the retailer service charges.
American Express has taken a page out of the philosophy of
truly “Marketing Loyalty to Consumers Through Valuable
Information and Benefits”….consumers are interested in!
Some other cards have offered a variation of this new Amex
effort; but not a total package like Amex.
The importance of giving and building value in the information stated – like buyer protection on bought items, warranty
policy and extended program, and offering car insurance on
rental programs – is what consumers will cling to, and await
more valuable programs… while using the Amex card.
Amex doesn’t mention price savings, or dollar discounts,
like our grocery industry shouts about and relies on. Grocers should understand it is more than just price that
builds loyalty!!!!
Interestingly, there is no case study or research that supports the notion that price builds loyalty….ever!!!
Are you listening supermarket executives? Hmmmmmmmmm.
The consumer mind must regularly deal with one policeman: Irony. AMEX is now offering its selected users the opportunity to build savings for their future in return for spending more in the present … and still be exposed to slickly-disguised fees and interest charges. That’s ironic.
It’s almost humorous to think that one can save money by spending money. Now THAT is a marketing plan. (My wife has told me for years how much she saves us by spending money….she’ll love this card.)
Seriously, I think we’ll continue to see these types of different offers come out as credit card companies try to differentiate. I do have to plug the Open card by American Express which I find gives nice rebates at places like Fed-Ex and Staples as well as an outstanding online tracking system.
Obviously, who pays the most are ultimately the retailers and the consumers themselves. The retailers get hit by the credit card companies on the discount rate and, eventually, that has to be passed on to the consumer in some small way.