Ameriprise to Enter Credit Card Market
March 28, 2008
It was recently announced that Ameriprise Financial Services Inc. is partnering with MasterCard Inc. This is Ameriprise first entry into the credit card lender market.
Why would a company enter the credit card lending market during a time when default and late payment rates are historically higher? The answer, Ameriprise intends to target big spenders and those with more solid and reliable incomes. This particular transaction illustrates how lucrative companies still consider the credit card market as a source of potential profit.
Ameriprise has more than 2 million clients most of whom are wealthy. This makes underwriting a fairly low-risk endeavor. “The timing for us is actually pretty good,” said a company spokesman. “Ameriprise considered many card processors but MasterCard’s World Elite program, which offers perks such as airport club access and the luxury travel service Virtuoso, were particularly attractive selling points.”
MasterCard is expected to gain a bit more of the market share of the affluent consumer market by entering the deal. Credit card processors such as MasterCard and Visa earn their profits from the fees they charge to card issuers and merchants for using their network. The more the cardholders spend, the more money they (MasterCard) make.
Bill Mathis, VP of MasterCard’s relationship management tem, said: “The affluent segment is one that MasterCard has been making investments in as a customer segment. Ameriprise Financial is a natural in that regard; they do appeal to customers at the higher end of the income spectrum.”
It is expected that Ameriprise will issue both MasterCard credit cards and debit cards with interest rates ranging from 7.5 percent to 11 percent.