Baxter CU Signs On for Visa’s High-Dollar Signature Card

Signature cards carry a significantly high level of operational details and rewards standards that made them something of a challenge for Baxter to offer. For example, Visa insists the Signature issuers offer a dedicated phone line for Signature card users to access their own set of cardholders services. The card also carries 24-hour concierge service that the CU obtains from Visa.

Block declined to say whether or not Visa sets any minimum credit scores for the cards or minimum sales volume but made it clear that the cost of a things like a dedicated phone line for customer service tended to mean that, effectively, an issuer has to expect pretty good returns to justify the card expense. He also said Visa had helped the CU evaluate its membership card base to see if there might be enough demand for the card. Block said Baxter passed both tests.

In addition to exclusive hotel, airline, shopping and car rental discounts, special fine dining and sporting event pricing, 90-day purchase protection, and international transaction fees, the CU said the card would have no pre-set spending limit and would carry interest rates of between 8.90% and 10.50%.

The card will also carry a $99 per year annual fee, but Baxter will waive it for those cardholders who maintain a sufficiently high balance in their share accounts, Block said. "We want the addition of the card to help more members to decide to make us their primary financial institution," Block said. "We decided a sufficiently high share balance would be a good incentive to waive the fee."

Block reported the CU began rolling the new card out to qualified members in April and already had issued around 200. Baxter has a goal of getting roughly 10% of its card portfolio or about 4,500 cards, to be Signature cards, he added.

Robert Hammer, founder and CEO of R.K. Hammer, a card consultancy based in Thousand Oaks, Calif., explained the overall card market now has become fragmented enough that a CU could issue a Signature card at a time when another CU or bank might be taking real losses on its subprime card portfolio.

First, in general, this is still a very hard time to be a card issuer, Hammer explained.

"The general market for cards is still tough, charge-offs still too high, and government and others all over the business models," he said, but still a CU issuing a Signature card could offer it successfully.

"The card biz does not all walk in lockstep; there are categories which behave entirely differently," Hammer explained. "For example, the higher risk subprime market would be a high-risk strategy right now, with a weakened economy, terrible new jobs numbers and bankruptcies still stubbornly high. On the other hand, our experience is that the high-end super prime market, while not immune to the laws of gravity or economics, seems to weather the foregoing a little better."

Hammer explained that a lot depended on the CU's pool of available cardholders. "It all depends upon how the FICO distribution within a given institution flows," he remarked. "If a CU has a disproportionately high amount of better FICO's, say in the 780-plus range, they may have a better opportunity than one might otherwise intuitively think," he added.

Visa has not said how many financial institutions issue Signature cards nor how many cards have been issued.