Sears is Shifting Credit Customers to MasterCard

In a bold move designed to ignite its receivables growth, Sears, Roebuck and Co. has begun asking its proprietary cardholders to convert to its general purpose MasterCard product. If successful, the move could have major implications for other bank card issuers since the Sears private-label card base has $26.8 billion of receivables, ranking it seventh in the nation among all credit card issuers. Kevin Keleghan, president of credit services at Sears, told the American Banker that the company intends to move into the top four issuers and compete directly for bank card customers with CitiGroup, MBNA and Bank One's First USA division. With the ability to cross-sell to its current proprietary cardholder base of over 60 million accounts, the potential for developing a major bank card portfolio seems promising.

Sears began its MasterCard program test four years ago by issuing MasterCard products to 200,000 of its customers. This past June it began a direct mail campaign to about five million more. The campaign is appealing directly to Sears cardholders who may want greater utility out of the card. Keleghan said that 45% of the customers solicited for the Sears MasterCard had not used their Sears card in the past year. Another fifty percent had used it but had not revolved a balance. For the next wave of solicitations, the company has targeted an additional 20 million customers who have barely used their Sears card in the past year. Keleghan said this group of customers has about $100 million of outstanding debt on their bank cards, some of which could presumably be attracted to a balance transfer program.

To compete in the already-crowded bank card arena, the new Sears MasterCard product will offer preferential rates on Sears purchases (a fixed rate as low as 9.9%) and a floating rate in the mid-teens on other purchases. Before the end of the year the company will expand the marketing campaign to target potential customers outside its proprietary cardholder base. The company plans to offer a full range of card products, including the traditional private-label card, its Sears premier card and several versions of the MasterCard product.