American Airlines Card Program Likely To Be Very Innovative; Program May Include Approach To Rewards

DALLAS – When the almost $4 billion American Airlines Federal Credit Union finally starts a credit card program, it might do so using some of the most cutting edge and innovative card reward programs in the industry. Certegy, the credit card processing firm for many credit unions headquartered in Alpharetta, Georgia, announced this week that American had agreed to have the firm process its card transactions, as well as conduct rewards programs, business development and consulting services for five years. The credit union has not had a card program before and may be the last credit union of its size in the country to start one, according to both Certegy and credit union executives. “We have regularly surveyed our members and they have told us that they wanted a card program or to carry our card,” said Jim Fry, marketing manager for the credit union. “But before we made that decision we wanted to make sure we were doing the best we could for our members.” American had been reluctant to start a card program in part because it had a very successful personal loan program that had been very popular with its members seeking to consolidate debt or make the sorts of large purchases that are often put on cards. But the credit union had also found that the loan program was not meeting the payment needs of its members who wanted to be able to access their funds for things like meals and travel and use over the Internet. American plans to issue the cards first to its own employees as a beta test in mid-July and, tentatively, to its members beginning on September 1. Fry emphasized, however, that the tentative deadlines might shift depending on which details American and Certegy settle upon. Currently the credit union has 200,000 members, and Fry said that American hopes to issue 10,000 cards before the end of the year and to shoot for eventually attaining a 20% penetration eventually. The credit union also hopes to generate $1 million dollar in revenue from its new card program by the end of 2004, an estimate that Leslie Rowe, an assistant vice president with Certegy, said the card processing firm considers conservative. “Everything we have seen points to a very strong pent up demand among members,” Rowe said. Fry acknowledged that a lot of questions about the program remain to be settled and said that now that American has chosen a processor, the credit union looks forward to finalizing them in the coming weeks. Among the details still be settled include such basic things as the types of VISA cards to be offered, the interest rates those cards will carry and whether or not the credit union will offer any balance transfer offer as part of its initial marketing package. Fry also said the credit union is studying what will be among the most innovative and cutting edge rewards programs credit unions offer. The concept is called “house holding” and it allows a house hold with multiple credit and debit card holders to earn points on all their card transactions and to pool those points in one household account. Rewards experts have estimated that house holding can significantly drive card use, as cardholders begin to seek out ways they can earn more points for switching a transaction from checks or cash to cards. The concept has taken off among some larger card issuers, but not as much among credit unions. But the American program might also take the concept a step further, and allow cardholders to earn rewards points even for using other credit union products. “We are actively looking at, for example, allowing card holders to earn rewards points for taking out a car loan or other loan product,” Rowe said. Certegy and American executives plan to sit down again to settle more details about the program in the coming weeks. -