Corporate Credit Cards Produce Bank Revenue

Corporate credit cards help banks make money one swipe at a time.

The challenge for smaller credit card providers such as Security BankCard Center Inc., a division of Arvest Bank Group Inc., is to stay competitive with larger credit card providers like Bank of America and MBNA.

“To me, the challenge is saving our customer when they want to leave us for the interest rate,” said Harleta Stokes, vice president of credit and customer service collection for Security BankCard Center in Norman, Okla.

But she thinks her firm stays pretty consistent with its rates. Stokes said when her customers switch to a larger credit card company they may find it more difficult to communicate with the company.

She said Security BankCard has adapted to the times by being more competitive with interest rates and incentives such as lowering an introductory rate to get a person’s business.

Business credit card accounts can help smaller firms streamline their accounting processes and place restrictions on spending. Stokes said her firm has the ability to restrict the card to a particular type of business or vendor.

Stokes said Security BankCard Center has grown steadily. The credit card center in Norman employs 26 associates.

She said about 70 percent of the company’s credit card accounts are consumer accounts and 30 percent are corporate.

In 2005, Security BankCard added 12,300 new credit card accounts, of which 6,110 were corporate. Stokes said the firm has a total of 66,300 accounts.

She said corporate cards are very profitable because of the number of times a corporate cardholder will use the card. The company generates more transaction fee revenue on the corporate side. It generates more revenue from charges such as late fees from consumer cards.

Stokes said her firm receives a portion of the fee charged to the merchant every time one of its credit cards is swiped.

“The fee is based on the type of transaction and the type of account being used with corporate transactions typically costing more than consumer credit card transactions,” Stokes said in an e-mail.

Stokes said the fee associated with each transaction is typically about 2 percent of the total amount in the transaction.

Security Bankcard also furnishes merchants with the swipe boxes for credit cards. Stokes said Security BankCard also issues cards for other banks, in addition to issuing cards to its own customers.

David Russell, president of First Security Bank in Fayetteville, said his firm doesn’t have a formal business card offering but is in the process of developing one.

Russell said the card has been in development for 90 days. He said it takes about six months to bring a new card to the market.

Russell said his company wanted to be able to offer the full range of customizations that come with business cards. First Security’s personal credit card product through Visa was one that didn’t offer detailed reporting options.

He said First Security plans to make about 2,000 cards to have in stock initially.

Russell said the credit card was originally designed for individual consumers and about 10 to 15 years ago there was a surge in interest from businesses to have banks issue credit cards.

Russell said a credit card account functions as an unsecured loan from a bank.

Russell said the bank sets the credit card limit for each customer based on the business’s financial condition and the length of time the business has been around.

For First Security’s forthcoming business credit cards, 100 percent of the balance outstanding will be due at the end of the month.