PNC tries new credit cards, old strategy

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It's starting to seem like old times at PNC Financial Services Group.

Nearly a year after it began offering home mortgages, a business it had exited in 2001, Pittsburgh's largest bank yesterday added credit cards to its lineup, getting back into another business that it got out of in the late 1990s.

"We found that in order for us to move forward and deepen our relationship with customers, we had all the pieces except one," Dan Tuccillo, executive vice president of consumer products, said of PNC's decision to start offering credit cards again.

The Visa-branded cards will be interest-free for the first year and earn points that cardholders can redeem for cash, merchandise or travel rewards. Customers who sign-up before Jan. 1 will receive a $50 credit on their statement with their first purchase.

The move, aimed at making PNC a one-stop shopping point for its banking customers, is a reversal of strategy for the company.

PNC sold its credit card portfolio to MBNA Corp. in 1999, saying it wasn't big enough to compete on a national scale in a business dominated by a handful of giants. Since the sale, PNC has offered customers co-branded credit cards through MBNA, which ran the program and owned the accounts.

The new credit card program is PNC's latest effort to woo retail banking customers. It comes on the heels of last week's announcement that the bank will start reimbursing certain customers for automated teller machine fees they incur when using an ATM outside the PNC network.

Last fall, PNC also started originating home mortgages again under a joint venture with San Francisco-based Wells Fargo. It had sold its mortgage banking business to Seattle-based Washington Mutual in 2001, saying it didn't have the scale to compete.

The sale of the mortgage and credit card portfolios around the turn of the decade came at a time when big banks were de-emphasizing branch banking in favor of faster-growing, fee-based businesses such as money management, trust and custody services, corporate cash management and other processing operations.

Pittsburgh-based Mellon Financial took that strategy to the extreme, selling off its century-old branch banking business to Citizens Financial in 2001.

Since then, however, banks have taken a renewed interest in consumer banking, valuing it as a steady, predictable source of income.

Starting Friday, PNC will market and issue credit cards -- including one for small businesses under the MasterCard brand -- in partnership with Minneapolis-based U.S. Bank, which will process the transactions and statements under contract with PNC. Details of the outsourcing contract were not provided, but Mr. Tucillo said using U.S. Bank, a leader in the field, will help PNC control costs.

PNC will set credit card terms and collect the revenue generated when people use their cards or carry a revolving balance. But instead of trying to be a national player, PNC this time around will market its credit cards exclusively in its footprint of eight states and Washington, D.C., PNC's Mr. Tuccillo said.

Under the program, the interest rate on revolving balances after the 12-month introductory period will vary from prime plus 3.99 percent (currently 12.24 percent) to prime plus 7.99 percent, depending on the customer's credit history. The card carries no annual fee.

Under a so-called "universal default" clause maligned by consumer advocates, customers could see their interest rate zoom or lose the zero percent rate if they don't pay on time or are late paying other creditors.

Under the rewards program, customers will earn the standard in the industry of one point for every dollar charged. Some of the more aggressive card issuers have been offering up to five points for every dollar on so-called everyday purchases, such as groceries and gasoline.

PNC's plan to limit credit card marketing to its footprint is a sensible strategy, said Bert Ely, a banking consultant in Alexandria, Va.

"It will take a couple of years to see how this works out, but the logic of it makes a lot of sense," he said.

"Your incremental costs of selling an existing customer another product is relatively low, and you cement the [customer relationship]. There is a lot of payoff."

PNC will offer a MasterCard-brand card for small businesses and a Visa-branded card for individuals.


Patricia Sabatini can be reached at psabatini@post-gazette.com or 412-263-3066.


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