SEPTEMBER 2004

Bank of America and GM
Offer Cobranded Debit Card

One of the most successful cobranded card rollouts of all time was the General Motors Mastercard product launched in the early 1990s. That partnership between GM and Household International reached the million-cardholder milestone faster than any card rollout in history. Now, GM has forged a new partnership with Bank of America to launch a cobranded reward program for a debit card product. Pilot programs were launched in August in Tennessee and Florida.

Bank of America is the largest debit card issuer in the U.S., with retail banking outlets in 28 states. The bank's enormous customer base is what attracted GM to the partnership. Rather than build a debit card business model around the revenue sharing from interchange, GM is counting on the card program to attract new customers. Jack Bowen, the general director of customer relationship management for GM told the American Banker, "For GM, we're in this for the relationships. We want the banks to be very successful, and at the same time, the game for us is scale, and to grow our market share on a national basis. And to sell vehicles."

GM debit cardholders will receive 2% of their signature-authorized card purchases as a credit toward purchase of a new GM vehicle. Cardholders will pay a $15 annual fee and can redeem credits within five years for $1,000 to $3,500, depending on the car model.

What's in it for Bank of America? James J. Accomando, the president of Accomando Consulting, Inc. (Fairfield, CT) told the American Banker that a debit card reward program is probably more valuable to a financial institution than a cobranded credit card program in terms of solidifying customer relationships. "When they nail a debit customer, that's a true, cemented customer with the bank. You may have five credit cards, but one primary checking account. When they pick up a debit customer, it's serious."