Why Merchant-Funded Credit Card Offers Can’t Last

In the past few years we’ve seen a proliferation of merchant-funded credit card offers. Whether it’s a year of Door Dash Dash Pass from Chase or $15 per month credit at Uber from American Express Platinum, a credit with airport security fast track service CLEAR, or $50 twice a year with Saks, numerous businesses want access to a credit card company’s customers.

Banks are attracted to benefits they can deliver to customers at no or low cost (or even at a profit, the details on each deal are different). And bundle enough of these benefits and you can sell an annual fee increase, too, helping the bottom-line for a card product that may be struggling to earn a profit despite being very attractive to consumers. The rewards landscape is competitive and expensive.

However these offers never last. Once the brand gets its new customers, they don’t want to keep paying or offering the discount. At a certain point the merchant figures out that they’ll save more money by ending the offer than they’ll lose in business from doing so.

Lyft acquires Chase customers, those customers get used to using Lyft, why keep paying to incentivize those customers through Chase? If anything it’s better to spend those marketing dollars directly through your own channels.

Eventually Walmart will have Amex Platinum customers in their database from the Walmart+ offer, and the whole idea is to get these customers they wouldn’t otherwise reach. But giving away Walmart+ for free isn’t the long-term model, it’s to convert some of those cardmembers into long-term customers.

Capital One used to have a lucrative Hotels.com partnership offering 10 points per dollar on hotel spend. That was marketed with a specific end date, because the contract did have an end date. And it didn’t get renewed.

But once those offers are built into the value proposition of a card, you need a continual pipeline of offers to replace the ones you’ll lose, otherwise cardmembers perceive a loss of value in the product.

There’s far less risk in programs like Amex Offers and copycats like Chase Offers since those are designed to be short-term or one-offs.

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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  1. $180 CAC is incredibly small. I’d bet the LTV of a customer with a fee-based credit card is significantly higher than an organic conversion.

  2. @Mike – Only if they keep using your product because you have some competitive advantage. Uber for example doesn’t. I use my monthly Uber credits for Uber eats or one Uber ride, and revert right back to using Grubhub, DoorDash, or Lyft depending solely upon cost after I use the credit.

  3. My 2 year free DashPass delivery (through Chase Sapphire Reserve) is up at the end of January and I’ve received a lot of value out of it. They tell me I’ve saved $1,098 in delivery fees. (Yeah, I use DoorDash a LOT) I’m really sorry it’s not being renewed and may downgrade the card to Preferred because of it.

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