No-Frills, Social Credit Cards on the Rise
The first trend is issuers introducing no-frills credit cards that have no rewards, only lower interest rates. These cards are directed at "revolvers," customers that carry a balance. Revolvers need to have a credit card with the lowest possible APR so they minimize their interest payments.
Barclaycard Ring from Barclays(BCS) is being tested with some customers and will be available to the market later this spring. The card has an 8% APR that applies to purchases, balance transfers and cash advances. There is no annual fee, the late fee is a maximum of $25, and the foreign transaction fee is 1% (most issuers charge between 2% and 3%). The cash advance fee is only $1 per transaction (most cards charge a 3% fee for cash advances and an interest rate of 20% to 25%). The card has no rewards or special introductory rates on balance transfers, attractive features commonly found with other cards.
Some major issuers have introduced cards in the past year directed at this no-frills audience. Citi introduced Simplicity, a card with no annual fee, penalty rate or late fee. The card has no rewards and an APR as low as 12.99%. Slate from Chase has a 0% introductory rate on purchases and balance transfers for 15 months. There is no balance transfer fee if you transfer a balance within the first 30 days of your account opening.
The second credit card trend seems to be a movement toward incorporating social media with their customers, and the new Barclays card wants to take this to another level. Cardmembers will have an opportunity to see the card's financial profit and loss statements. Using social media, cardmembers will have a voice in how the card is managed and serviced. Consumers will be asked for their input several times per year. The company claims customers will share in the profits of this card. but the details of this feature are unclear.
The fine print says profit sharing is not based on the actual profits of the company. Instead, the profit sharing will be based on a calculation that will be used to determine what will be shared. It is offered at the sole discretion of Barclaycard and can be discontinued at any time.
Some people may wonder why all cards can't offer these types of rates and fees.
Barclays has reduced the expenses on this card by eliminating all rewards. In addition, they are hoping to create awareness through social media, and therefore, limiting the money spent on advertising and promotions.