Posted: March 26, 2013
An affinity for Affinity programs
Five tips to keep yours workingBy George Schmelzel
Nonprofits and professional associations are always searching for new, creative methods of raising funds. Affinity credit card programs offer a solution—helping these organizations build awareness and donations with each new account a member activates and every purchase that member makes.
But in recent years, certain lenders have started to pull away from affinity credit card programs. Requirements for enrollment in many affinity programs today have escalated from 70,000 members in an organization to 1 million. While lenders’ decisions can be attributed, in part, to the shrinking economy, some banks have shuttered their affinity programs because they couldn’t effectively market and manage customized affinity programs.
That void has left those organizations that reap the rewards and revenues of affinity programs—charities, professional associations, schools—either without an affinity card financial partner at all or with terms that no longer provide value to their organization or their supporters.
For those organizations big or small, here are five tips to help begin, migrate or even just reevaluate affinity programs and financial partners.
Tip 1: Evaluate the rewards program.
Some affinity programs pay their partnering organizations for new accounts, give them ongoing percentage of monthly charge volume and/or cut them a percentage off balance transfers. Some even reward supporters and members with points, miles, or cash back.
Rewards programs are not all alike—and not all are actually good. Some issuers will throw rich rewards at the group, but fund the program through the cardholders, by way of higher rates and pricing. Some rewards have a short shelf life, with points that expire in a year.
Compare affinity programs and know what the rewards are, who gets them, and most importantly, who pays for them.
Tip 2: Know the terms.
Affinity card issuers see value in reaching a particular customer base, but they also have to make money on the affinity card programs. Understand where that revenue is coming from—and if supporters are shouldering an undue burden.
View the affinity program through the eyes of the organization’s supporters. In fact, go so far as to request and read their customer agreement. What are the rates and fees? Are there annual fees? Does the lender charge cardholders extra for personalization? Are there other hidden—or deceptive—fees that diminish the value for the organization or its supporters?
Tip 3: Appraise the marketing support.
Traditionally, issuers have controlled the marketing message, using direct mail as their primary, if not only, tool to spread the word about the affinity program. With social media, the toolkit has expanded and organizations are gaining control and customization of how they market affinity programs to its supporters and members.
Understand where the affinity partner falls in the marketing spectrum and what support is available to help control the look, feel, and timing of the message.
Ask these questions: Does the issuer provide tools to support marketing efforts beyond direct mail? Do you have to wait for bank approval of marketing messages or does the issuer supply pre-approved copy that can be readily inserted in a newsletter or shared in a social media update? Does the program give the nonprofit the flexibility and freedom to send messages on its own timeline, rather than the issuer’s?
Tip 4: Keep control of your list.
To recapture the costs of an affinity program, many lenders ask for direct access to the organization’s supporters and control over the marketing messages and timing, so they can cross-market other financial products and services.
Decide whether you want to give up that control. Some affinity programs allow organizations to keep control over their own lists, so the organization can customize and coordinate messages within its own marketing efforts and respect supporters’ privacy.
Tip 5: Check references and reputation.
When entering an affinity program, issuers not only get access to the organization’s database—they also get an implied endorsement.
Choose a banking partner carefully. Talk with current affinity partners. Weigh the bank’s reputation among other nonprofits. Check their asset quality, capital adequacy, profitability, and loan growth, all factors that indicate the bank’s strength, stability and economic responsibility. And then select a partner that is prudent, and provides long-term service over short-term gains, and whose corporate values align with your own.
George Schmelzel is senior vice president of Card Services and Payment Solutions at UMB Bank.