A few years back we saw new regulations enacted regarding debit card fees, which has had a significant impact on debit cards that offer rewards. Previously the merchant fees for using debit cards could be substantial, while nowadays they’re capped so low that there’s no way issuers can offer rewards and still make money (I believe they’re capped at around 21 cents per transaction, plus 0.05%)
While debit cards were never as rewarding as credit cards, they nonetheless often had some rewards. For example, I remember there was a Delta SkyMiles debit card offering one mile per dollar spent. Unfortunately all of these rewards were killed when the associated merchant fees were limited as well.
However, prepaid cards are classified differently than debit cards, and merchant fees for them can often be similar to those of credit cards.
While United has an exclusive credit card co-brand agreement with Chase, it was announced today that United and Netspend are partnering to create a co-brand prepaid card, which will be issued by Republic Bank. The United MileagePlus GO Visa Prepaid Card will be introduced this summer, and will be the first US prepaid card offering consumers the ability to directly earn miles for qualifying purchases.
Here’s what executives from both companies had to say about this new offering:
“The market for prepaid continues to expand. Our new MileagePlus GO Visa Prepaid Card will attract frequent flyers who may not know much about prepaid cards but have an affinity to United’s MileagePlus program and are looking for new ways to earn miles,” said Netspend president Chuck Harris. “We are also eager to offer the opportunity to earn airline miles to consumers who are looking for new financial solutions to help them manage their money. Several of our prepaid cards offer a loyalty component, but no other prepaid card in the U.S. offers the ability to directly earn miles through a major airline. We’re excited to reach out to this consumer with a great partner like United Airlines.”
“With the MileagePlus GO Visa Prepaid Card, we are providing another avenue for customers to earn MileagePlus miles,” said Praveen Sharma, vice president, Loyalty, at United. “Through MileagePlus, we offer customers a variety of ways to both earn and use their miles — from flights in United’s global network to once-in-a-lifetime experiences.”
The prepaid market has grown a lot — according to the press release, it has grown from a sub-$1 billion industry in 2003, to a $100+ billion industry.
The exact rewards structure of this new product hasn’t yet been announced. Frankly I suspect this card won’t be all that lucrative compared to most credit cards out there. In other words, I suspect at best it will offer one MileagePlus mile per dollar spent. However, for someone who otherwise isn’t eligible for a credit card, this will no doubt be an interesting new option. I’m surprised to see it took airlines so long to get into this market.
I look forward to seeing the details of this new product.
(Tip of the hat to Brad B)