Walmart Credit Cards?

by JT McGee

Walmart credit card offer envelopeA month or so ago Ben Bernanke appeared in my mailbox. Now Sam Walton’s in my mailbox to sign me up for one of his credit cards.

If there’s one thing I noticed about this credit card offer from Walmart, though, it’s that Walmart understands their core consumer better than anyone.

Generally lower-income, less educated, and less likely to have a bank account, Walmart’s core customer is a potentially profitable banking customer…if customers can be pushed into opening a new line of credit.

Bank of Walmart?

Walmart has chased its own bank for a while. Competitors like Target have beaten regulatory difficulties in getting their own banking license. Starting a bank means that Walmart can process its own debit and credit card transactions, saving the company millions, or even billions. Walmart has banking charters in Mexico and Canada.

The company plans to expand its MoneyCenters into all of its 4,300 US stores. Only 1,800 stores have a MoneyCenter right now, a practical kiosk which allows consumers to cash checks, buy prepaid debit cards, and make very retail banking transactions. It’s a cash cow!

Walmart charges $3 to cash a check worth up to $1,000, and $6 for checks up to $5,000. The fee is waived for people who put their cash on a pre-paid Walmart debit card. Even more money is made when shoppers use their new cash in the store immediately.

Maybe this is why Walmart wants smaller stores? Maybe Walmart wants to penetrate into lower-income areas where people don’t have access to banks, transportation (to go to another store), or groceries?

Walmart Credit Card Specifics

Back to the credit card application at hand…

On the outside of the envelope is very attractive marketing, a red arrow pointing to a Walmart credit card picture. Inside the arrow the text reads “Save 10 cents per gallon on gas at participating Walmart gas stations now through September 30, 2011.”

Everyone loves saving money on gas. But come on, Walmart, you sent me this thing on August 16th. I can count. You’re not giving me a whole lot of savings on my gasoline, bro!

There are a few upsides to this particular credit card:

  1. No annual fee – I assume that this is a pretty powerful marketing strategy for credit cards. Since Walmart’s customer is more likely to be unbanked, they’re also more likely to have experienced excessive banking fees. I don’t like to pay annual fees myself, but it’s not necessarily a deal breaker, I suppose.
  2. Free FICO Score – Unlike other credit card companies, Walmart’s GE Money Bank Credit Card is luring customers to online bill pay with the ability to track your FICO credit score. Walmart’s customers are looking for deals; a free FICO sounds like a great deal!
  3. Special Financing Offers – On each billing statement and circulars, Walmart is going to up the ante with even better deals for financing your purchases! Woohoo.
  4. $60 cash back – This is probably the #1 money maker for this card, and a great convenience for Walmart customers. The card allows you to get up to $60 cash back once per day when you make a swipe at a Walmart store. Interesting… According to my research of the fine print, the $60 cash back isn’t a cash advance, but a purchase. That’s a good thing as far as fees and interest are concerned, as the grace period applies to the cash back feature as well as any other ordinary purchase.

No Income Necessary?

The most interesting thing about this particular credit card is that apparently there’s no need to earn an income to apply, or to be approved.

The application piece asks only for date of birth, your Social Security Number, home phone, and work phone (I wouldn’t put my work phone), and an email address.

Sign it and call it good!

I’ve never seen a company so aggressive with the next item on the application, though. Right after the signature line for application, there’s another signature line to get you to sign up for “Card Security,” a program in which your account balance is cancelled if you become disabled, unemployed, take a leave of absence, or are hospitalized.

Walmart credit card application promotes card security

A ton of cards offer this program, and it’s probably one of the worst deals in the world at a monthly cost of $1.66 per $100 in account balance. Usually you get “free” goodies for signing up to “Credit Security” programs. Walmart just puts it on the application. I don’t think I’ve ever seen that before!

Bottom Line Review

End of the day, this credit card is way more exciting to me as a business model than it is a credit card. It comes with 22.9% APR, and likely a really tiny credit line, since they don’t even ask for income.

Plus, this particular version of the Walmart card is a GE Money Bank product. I’ve had GE Money Bank cards before, and they’re still the ONLY company to close my account even though I had perfect payment history. I previously had GEMB’s PayPal credit card.

GE Money Bank does hang out on the lower end of the totem pole of plastic, but hey, it’s a starter/rebuilding card for those who need one.

There’s a better version of this card, one which can be used at all Discover networked point of sale systems and accrue up to 1% cash back for purchases.

Basically, what does this mean for Walmart as a business? That’s the real question of the hour.

{ 4 comments… read them below or add one }

Daniel September 3, 2011 at 23:18

This is a very intriguing post. Since Walmart customers tend to be less educated and have less income, these folks have less money. They aren’t investing 10K at Walmart. The shoppers might spend more at Walmart, but with these fees and annual percentage rates like 22%, there is a far greater chance of customers defaulting. So I think the big question is will the default rate erode the additional profit from increased spending?

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JT September 4, 2011 at 15:26

Given the insanely high APR, I’m fairly sure that defaults are already priced into the cost of the card.

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Tamerra Ocella Cantrell February 13, 2012 at 02:31

I don’t know but everyone is diffrent

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C. Harris February 13, 2012 at 12:10

Wall Mart Credit Card. Your website STINKS!!!! You can’t find a single customer service number to contact an actual individual about your account. That’s crazy! Believe it or not people still like one on one customer assistance.

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