Americans are exercising their credit cards more than ever. This trend has not escaped the notice of Wells Fargo (NYSE:WFC), who's looking to grab a bigger slice of the credit card pie. The bank intends to begin with its own customers, and it has announced a new partnership with American Express (NYSE:AXP) which will mix a credit card push with a cross-selling extravaganza. This frontal assault on the consumer credit market will also feature a new card that helps customers pay down their loan balances at Wells Fargo.
Wells has been planning a credit card blitz for some time now. The bank is facing a slowdown in the mortgage business, and expanding into credit cards makes good sense, particularly when use is up and yields are so sweet. As The Wall Street Journal notes, Wells reported yields on credit card loans of 12.55%, compared to mortgage loan yields of 4.23%.
Wells already has branded cards with partner Visa (NYSE:V), offering several reward-style cards. Only 35% of the bank's customers currently use a Wells-branded card, and the idea is to push that percentage higher. If Wells can persuade its bank customers to switch from the card they are currently using to one of its cards, so much the better.
While the Visa partnership will stay in place, the deal with American Express will extend Wells Fargo's reach throughout the credit card's merchant network. The new cards will be offered sometime next year, and AmEx will provide services to help create a new loyalty program for the bank as well.
A new rewards system?
Before the announced pairing up of Wells and AmEx, the bank revealed another credit card offering: A rewards card that could help customers pay off consumer debt held at Wells Fargo. Similar to its Home Rebate Card, which enables customers to use points toward their mortgage loan, the new program would allow users to apply a rewards card rebate to any loan a consumer had at Wells Fargo -- auto, student, or mortgage.
Though not expressly stated, I assume this new program will be offered in conjunction with AmEx. Though the notion of applying reward points to a variety of bank loans is new, the basic idea is not.
Both JPMorgan Chase (NYSE:JPM) and Bank of America (NYSE:BAC) offer a palette of rewards cards, with myriad choices as to how those reward points can be applied. In addition, each offer a cash-back option, which could ostensibly be applied to bank loans at either of these banks. Of course, the same could be said for at least some of the current reward card programs at Wells.
It's an interesting marketing ploy, though, and time will tell whether it helps boost Wells' somewhat marginal presence in the credit card market. Certainly, signing on with American Express, while keeping its affiliation with Visa intact, will broaden its horizons. Whether its new pay-down-a-loan rewards scheme will add to its reach is more questionable. But, you can't blame a bank for trying.