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Today TPG Contributor Nick Ewen continues his series The Weekly Wish, looking at flaws, shortcomings, and room for improvement in the world of travel and loyalty programs. Today’s wish: a transferable points program from Bank of America.
2014 has seen its fair share of improvements on the loyalty front. Sure, there have been devaluations (ahem, Delta and United, ahem), but I’ve been excited to see Citibank improving the benefits on the Citi Prestige card, and Chase adding Singapore Airlines as an Ultimate Rewards transfer partner. Taking the cake so far has been the emergence of Citi ThankYou Rewards as a transferable points program after the addition of new transfer partners (10 and counting). There are now three major credit card issuers with transferable point currencies (Citi, Chase, and American Express), as well as Starwood Preferred Guest.
The proliferation of transfer partners has highlighted a big hole in the offerings of one major credit card issuer: Bank of America. Despite being one of the largest card issuers in the U.S. (#3 in 2011, according to CardHub.com), I believe that they are missing the boat by not having a “premium” card, and with the new changes to Citi ThankYou Rewards now in effect, Bank of America risks being left in the dust. This serves as the impetus for today’s Weekly Wish: that Bank of America releases a card with transferable point options.
To be honest, I was a little surprised at how high Bank of America ranked in the article linked above, as their card offerings are relatively unheralded. They do have some decent options that TPG has written about before; namely, the Alaska Airlines Visa Signature and Virgin Atlantic MasterCard. However, consider some of the cards offered by the other top issuers:
- American Express: Platinum, Premier Rewards Gold, EveryDay Preferred, multiple Delta cards, Hilton HHonors and Hilton Surpass, Starwood Preferred Guest;
- Chase: Hyatt, IHG, British Airways, United, Southwest, Ink, Sapphire Preferred, Marriott;
- Citi: Premier, Prestige, ThankYou Preferred, multiple AA cards, Hilton HHonors and Hilton Reserve.
These cards give you many ways to earn and redeem points with a variety of airlines, hotel chains, and other travel providers. Name a domestic loyalty program, and chances are their co-branded credit card is issued by one of these three players.
Now contrast that with Bank of America. Aside from the Alaska Airlines and Virgin Atlantic cards, they really aren’t a factor in the travel market. They have the BankAmericard Travel Rewards® Credit Card card (a cash-back option akin to the Barclaycard Arrival Plus), which comes with a 20,000 point sign-up bonus, has no annual fee, and offers 1.5 points/dollar on all purchases. However, cash-back cards just aren’t as potent as those with transfer options. Adding a new premium card with transferable points would create huge potential for Bank of America for two main reasons that I’ll explain below.
1. Bank of America has existing relationships with unique transfer partners among card issuers:
Virgin Atlantic was added as a Chase Ultimate Rewards transfer partner last year (and was already a transfer partner of Membership Rewards), but Alaska isn’t a part of the other transferable credit card programs (I’m leaving out SPG here, since technically it’s a hotel loyalty program and isn’t in direct competition with Bank of America). Based on TPG’s August valuations, Alaska miles are worth 2 cents apiece, so having a new method for acquiring those valuable miles would definitely increase application flow.
In addition, Bank of America is the issuing bank for several other airlines and cruise lines that are not connected to any transferable point program, such as:
- Royal Caribbean
These aren’t particularly valuable transfer partners, but as a points & miles enthusiast, I like having options. Since Bank of America already has existing relationships with these travel providers, it seems natural that they would be part of a new transferable points program, and being the only credit card issuer with access to cruise redemptions could be a huge bump in business.
Of course, Bank of America would want to explore other transfer options, including loyalty programs that are already connected to Chase, Citi, or Amex. Flying Blue, for example, is a transfer partner of both Citi ThankYou Rewards and Amex Membership Rewards, while British Airways partners with both Membership Rewards and Ultimate Rewards. However, starting with existing partners would be a good jumping off point, and would allow plenty of room for expansion later on.
2. Relationship Bonus:
Banks and other credit card issuers have an obvious incentive to gain you as a customer. The more money you spend on their credit cards (or the more money you deposit into their checking/savings/money market/investment accounts), the better. This is why some banks offer relationship bonuses to their cardholders that incentivize a broader banking relationship. Until recently, a prime example of this was the Chase Exclusives program offered by the Chase Freedom card, including a 10% point bonus plus 10 extra points per transaction for customers with a Chase checking account. This was replaced with a simple 10% bonus, but even that will be discontinued at the end of 2015.
Another relationship bonus is currently offered by Wells Fargo, who recently announced a foray into the travel credit card market with their Wells Fargo Propel American Express Card and Wells Fargo Propel 365 American Express Card cards. Cardholders who also bank with Wells Fargo can enjoy a 10%, 25%, or 50% bonus depending on the type (and size) of the account.
To me, this is where Bank of America could make a statement. By giving cardholders access to flexible, transferable points, and throwing in a yearly relationship bonus for banking customers, they could poach both credit card and banking customers from the other card issuers. This would hopefully push other banks to reevaluate their programs and look for more ways to improve benefits.
Keep in mind that Bank of America already does offer a banking relationship bonus on the aforementioned Travel Rewards card. If you’re a checking or savings customer, you’ll automatically earn a 10% point bonus each year on your total purchases. Unfortunately, the points you earn on this card are essentially worth 1 cent apiece and cannot be transferred, but issuing a premium card with a similar (or ideally, more rewarding) relationship bonus would be a good starting point.
So how might this work on Bank of America’s new card? I envision a tiered structure, where you would earn a 5% bonus on all points earned each year for each of the following conditions:
- Having a checking and savings account
- Having a CD with at least $25,000
- Having an investment account
- Average annual account balance of all accounts >$250,000
- Average annual account balance of all accounts > $500,000
That would mean that a high roller with all of the aforementioned accounts and over $500,000 in total would be able to earn a 25% bonus. Someone like me, who has just a checking & savings account with the bank, would only earn a 5% bonus. Still, even that extra amount would be an interesting enticement, and depending on the other benefits of the new card (annual fee, bonus categories, etc.), I would be tempted to apply.
Is Bank of America missing out by not having a premium card and transferable points program, or would a new card like this just add white noise to the market? Please share your thoughts in the comments below!
Chase Sapphire Preferred® Card
|Intro APR||Regular APR||Annual Fee||Foreign Transaction Fee||Credit Rating|
|N/A||16.24%-23.24% Variable||Introductory Annual Fee of $0 the first year, then $95||0%||Excellent Credit|