Where can affinity programs take you?

The number of credit cards in force in the United States is staggering. As of yearend 1997, Americans held 474.8 million major credit cards, according to the June 15, 1998 edition of Credit Card News.

A sizeable portion of these cards were affinity or cobranded cards. As of June 1997, 42 million households claimed to have one or more value-added or perk cards, many of which are cobranded, says Bruce Brittain, of consulting firm Brittain Associates in Atlanta. About 7 million households have affinity cards that give a portion of associated fees to nonprofit organizations, and another 14 million have air mileage credit cards.

These cobranded and affinity cards appeal to consumers who have specific interests and desires. There are special programs for consumers who love animals, want specific perks or want to benefit their alma maters. There's even a program for those interested in outerspace travel. Such programs are designed to cut through the marketing clutter created by credit card offers.

"Marketing is intense for credit cards," Brittain adds. "You can't go into the marketplace with a plain, vanilla offering and compete very well. Everyone is trying to add value to the consumer. The only people who the plain cards appeal to are the ones who are not able to get credit cards otherwise."

Fees from card use, finance charges or annual fee revenue generates income for the associated nonprofit group. However, no one knows which program type generates the most income for the issuing banks. In addition, there are no concrete definitions for a successful affinity or cobranded card program.

How long have you been around?

Each affinity or cobranding contract is negotiated under confidential terms. Since issuing banks are hush-hush about the profits from these programs, one key way to judge their success is by each program's longevity and the issuing bank's primary goals.

"Banks got into affinity cards because it gave them access to a database of names which have an affinity for the organization and a loyalty as well," according to Frances Dale, president of Entandem, Inc., a consulting firm in Sterling, Va. "It means for them better retention rates, higher volumes and therefore the bottom line is a more profitable account."

MBNA, the second largest issuer of credit cards in the nation, has instituted more than 4,500 affinity card programs since the company started the programs in 1983. MBNA claims to have started the first affinity card program when it struck a deal with the Georgetown University Alumni Association, according to Peter Frank, director of media relations.