Question
Banks Use Some New Shapes
To Push Their Credit Cards
By CARRICK MOLLENKAMP
Staff Reporter of THE WALL STREET JOURNAL
Ready for the miniature credit card?
Worried that consumers' wallets are overstuffed with rival plastic, credit-card issuers are starting to roll out miniature or oddly shaped cards to win over users. Instead of competing for room in the billfold, these new cards can, for instance, fit on a key ring.
Recently, Discover Financial Services began offering a kidney shaped Discover 2GO Card to its 50 million credit-card holders. It is about the same length as a regular card, but skinnier.
Bank of America Wednesday plans to start offering a minicard -- about half the size of a normal one -- to one million of its Visa credit-card holders. The goal is to offer it to all customers next year.
The new designs are the latest indication that competition among card-issuers has never been more brutal. Americans who carry plastic already have an average of nearly eight cards in their wallet, and they are increasingly willing to quickly switch from one to another to get a better interest rate or a reduction in fees. To win customers, card companies have been competing fiercely with new offers -- last year alone, for example, they mailed five billion solicitations, up from one billion in 1991.
Now they are trying different looks. Recently, the rage was for see-through or fruit-colored cards, an idea popularized in 1999 by American Express to differentiate its products in a market that is already saturated. The latest changes for the first time change the shape of the actual card -- with the idea that it doesn't have to be kept in a wallet at all.
The new designs aren't perfect, however. For instance, neither can be used where they might be most handy: at the ATM. That is because they are too small to be used in machines that require you to insert the card into a slot. The problem is the same for pay-at-the-pump gas stations.
Pocket Tests
Bank of America, one of the nation's biggest card issuers, says the idea came from an employee who got the notion for a key-ring card after noticing how grocery-store customers used tiny loyalty cards to get discounts. In testing, Bank of America found that when its minicard is attached to a key ring and the keys are shoved into a pants pocket, the rings fall to the bottom, and the card tends to stand up in the pocket, increasing the chances that a user will grab its card first.
To prevent wear and tear, the bank opted for a stronger plastic for its miniature card. The oval-shaped rival from Discover, a unit of Morgan Stanley, uses the same plastic as a regular card, but comes with a small protective case that can be attached to a key ring. While the card feels more fragile, the case makes it easier to detach from the key ring.
Tiny Magnetic Strips
Bank of America says it spent several months negotiating with Visa (which is an association jointly owned by the nation's banks) to make sure the new card would be easy for merchants to use. It had to prove, for instance, that the minicard's magnetized strip will work just as well as a regular card when swiped. Visa says it does.
The bank struck a deal with Visa giving the bank the exclusive right to use the miniature Visa card for a year. After that, other member banks can offer the card but they will have to pay a fee to Visa and Bank of America.
Bank of America is the nations' biggest Visa and MasterCard debit-card issuer, but only the fifth-largest issuer of Visa and MasterCard credit cards, and it is eager to boost its market share. David Robertson, publisher of Nilson Report, an industry newsletter, estimates that Bank of America's credit-card market share is about 5.4% compared with industry-leading Citigroup with 19% of the bank credit-card market.
Discover trails far behind Visa USA and MasterCard International. According to CardWeb.com, Discover had a 5.3% share of total U.S. card volume at the end of last year, compared with 52% for Visa and 30% for MasterCard.
Street Survey
An informal street survey in Atlanta of prospective users of the keychain credit cards met with mixed response. Some people said the new cards looked "cool," while others thought it might not be such a good idea. "I misplace my keys too much," says Chyvaun Jones, a 24-year-old Atlanta attorney.
Write to Carrick Mollenkamp at carrick.mollenkamp@wsj.com1