Flat-screen televisions, digital music players, and plastic. One of those things may seem to be an unlikely growth driver at Best Buy (NYSE:BBY), but don't go telling the consumer electronics giant that it may be a bit late to get into the game of affinity credit cards.
Customers have been receiving credit card applications this week for new Best Buy plastic, yet the retailer has taken the smart tack of tying the move to its popular Reward Zone program. The company launched the Reward Zone loyalty program a couple of years ago. Patrons would pay $9.99 a year to participate in the plan, which would send out gift certificates with brief three-month expiration dates in $5 increments for every $150 spent at the store.
The program was an easy sell for folks looking to make major purchases. The brief lifeline of the vouchers also helped get customers back into the stores quickly. Best Buy even raised the stakes last year by actually providing deeper sale prices on some items for Reward Zone members.
So it's brilliant, quite frankly, that the company should brand its new MasterCard product as a Best Buy Reward Zone credit card. Active participants already associate going to Best Buy with whipping out their plastic Reward Zone card, and now the company is able to offer a generous 4% back in gift certificate vouchers for in-store purchases. New credit card holders will also get 1% back from purchases charged outside of Best Buy (with a few categories generating as much as 2% back through the next four months).
Affinity credit cards aren't new. We even have one. Best Buy has simply found a clever way to launch the card in a way that will appeal to its preferred customers. There is money to be made in financial services. It's also not much of a surprise to see the company eliminate the annual fee of its original Reward Zone plan this week as a way to draw even more ardent shoppers into the fold.
Partnering with HSBC (NYSE:HBC) for the new card certainly isn't reason alone to give Best Buy a closer look as an investment. The company just happens to be at the right place at the right time, just as we head into the critical holiday selling season -- which promises to be a feast for chains like Best Buy and Circuit City (NYSE:CC), with cheaper flat-screen televisions, new iPods, and next-generation video-game consoles likely to be popular big-ticket gifts.
Best Buy has the ubiquity to pull off this kind of deal. It would be much trickier for smaller rivals like Conn's (NASDAQ:CONN), Rex (NYSE:RSC), and Tweeter (NASDAQ:TWTR) to roll out a loyalty program and have it dovetail nicely into a more conventional credit card launch.
So keep an eye on Best Buy as a company that is likely to score well over the holidays. Pardon the cheap wordplay, but the company truly is all charged up at the moment.
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Longtime Fool contributor Rick Munarriz prefers shopping at Best Buy to Circuit City, though he remains a fan of Best Buy blue and Circuit City red. He does not own shares in any of the companies mentioned in this story. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. T he Fool has a disclosure policy.
