Tuesday, July 19, 2011

Big Spenders

This article in Forbes reinforced many of our BC stereotypes, but also left me scratching my head. Long story short: BC has a fraction of the fanbase of other schools when it comes to affinity credit cards, yet outspends every other group by an absurd amount. First the numbers that stood out:

-- BC only has 597 people enrolled on a BC card. Forget bandwagon fans, we don't even have a fraction of what another private, catholic, non-football school like Villanova has (5,538).
-- Those 597 people generated $1.1 million in revenue for BC. That revenue is based on BC's share of the fees. As another point of reference, Stanford has 16,079 enrollees and only generated a $1 million.

Assuming that Mastercard generates 2% in fees and splits it with BC, that means that the average BC cardholder puts $187,000 in charges on his/her card every year. That's the average! In a down economy. Maybe our marketing is all wrong. Instead of trying to sell 45,000 tickets, maybe we should just sell whole sections to a few fans. We can fan them during the game, while they are fed grapes.

Once I got over the average, then the whole redemption thing left me scratching my head. I put everything I can on my credit cards and happily redeem the rewards. Travel, electronics, and even cash back all have their merits. So what can these BC big spenders buy with their 200k annual points? A pair of basketball tickets or some BC t-shirts. Maybe you want to tour the Yawkey Center. That will only cost you 5,000 points, meaning the average BC card holder can take the tour 40 times!

But if you are already spending $200K on your BC credit card, aren't you already buying all the BC tickets and t-shirts you want?

Now I really don't like to tell people how to spend their money, but if any of you big spenders have considered an investment in a media company, I know a great blog you can buy.


BCDoubleEagle said...

I was actually going to get a BC card last week, but when I saw that the interest rate is 19.99% I just laughed and forgot about it.

mod34b said...

The BC numbers must be a typo or Due to some other error or quirk (e,g. Some hedge fund used a BC card to buy $50,000,000 in gold!)

Just look at these three numbers for schools with similarly affluent graduates and you know something is off with the BC numbers

BC holders 597. - revenue $1.1m
Yale holders 9,260 - revenue $1.1m
Harvard holders 6,740 - revenue $1.0m

The 597 number is straight out of a Federal Reserve Report see report, but still there MUST be an error/oddity

Also, I think your own math to get to an avg of $187k charges per user is off. I get an average of about $92k per user

eagle1331 said...

I think a large factor is American Express too. AmEx markets towards college kids with their "Blue for Students." At the same time, as soon as you get away from your parents you are hounded about keeping your credit in shape, don't sign up for cards, blah blah blah. If you get the AmEx or BoA debit/credit card before you get to BC, the likelihood of getting a BC card too declines. They don't market well to alumni and unlike any other stadium I've been to, they don't offer something "cool" to sign up at games, don't offer great rewards, and don't offer enticing interest rates...

ATL_eagle said...


My math is fairly speculative, but this is how I got there.

The average BC fan is contributing $1,842 to BC via fees. Assuming that represents 1% of the gross transaction revenue (with MasterCard getting the other 1%) then that means the average is 180K. I typed 187 but it probably should have been 184.

mod34b said...

ATL -- ok. I see. I used 2% to arrive at 92k and you used 1% to arrive at 184 k (92 x 2). Same math, different divisor.

But if you take your number, $184,000, it means the average user charged $15,333 every month. Only a true looney would charge that much in a month, let alone every month. So, something is askew there.

But if the interest rate is actually 19.99%, and BC's take is more like 5%, then the numbers start to make some sense.

Plus, using the Fed's numbers, the average BC user is only contributing about $150 a month to BC ($1,100,000 annual revenue to BC / 597 users/ 12 months = $153 a month to BC by ~ 600 users). That seems to make more sense. But still I suspect there must be an error with the Fed's 597 number.

Any finance Whizzes out there? I am sure I am making some errors too here.

BCDoubleEagle said...

34b wrote:
"But if the interest rate is actually 19.99%, and BC's take is more like 5%, then the numbers start to make some sense."

The interest rate is distinct from the percentage of each transaction that the credit card company takes. The interest rate is the finance charge that the consumer pays when he carries a monthly balance on the card. In contrast, there is a separate charge (usually around 1-2%) that the credit card company takes from the retailer (not the consumer) at the moment the transaction takes place. This latter fee is, I believe, the source of revenue for BC.

AlbanyEagle said...

Are these people using these cards to pay their kids' tuition, perhaps?

ATL_eagle said...

BC stopped taking credit cards for tuition payments so that is not the case.

Walter said...

That link posted an update to how we apparently achieved such a high number. Nice move from our officials to land that kind of guaranteed bling.

Rob said...

BC's is offered through GE Money Bank, which only has two other schools its associated with. The other is Northwestern, which, while not as high as BC, still works out to about $112K per alumni at the 1% reimbursement rate. I'm betting that GE Money Bank was starting out its branded card business and offered BC and Northwestern a much higher percentage share to get their business started. Or perhaps, their model is based on far less generous point purchases, with a greater share of the credit card fees split between the school and GE.

If there was a change around 2008/9, this might explain why the total card holders are so low, since there are fewer legacy cards.

No inside information on that, just some guesses.

Rob said...

Hahaha, or, I could just check the updated link. Good to know BC is responsible for more of my junk mail, but whatever, I'll consider that a small contribution to the $1M it gets from GE

Scott said...

Smart move by BC. They realize affinity cards will never appeal to BC's "affluent mobile professional" alumni, b/c they have crappy rewards/services. BC alums are loyal to Amex, Visa Signature, MC World, etc. So rather then negotiate for a few more basis points on the revenue split, BC sold a far more valuable asset ... exclusive access to our students and young alums, who one day will be big spenders. Very smart.

JBQ said...

BC is a "money" school. I would say that these numbers are outlandish. If true, 597 users for revenue of 1.1 million says a lot about BC. Once, I inquired about the card and was denied within five minutes. Maybe, BC does not need the money and does not care how many fans show up because they are generating plenty of revenus from some other source within the ACC.

Scott said...

JBQ, Forbes updated its article to explain the story behind BC's numbers.

BC is making very little money off of its 597 cardholders. BC gets $60-$80 per new account, and a small share of the discount rate and interest payments (less than 20%). And there is nothing special about BC's affinity card, it's a garden variety card with low-end perks .... meaning the cardholders aren't big spenders. So it's not luxury/VIP card designed for whales (as I first thought).

The bulk of the money BC receives from providing GE Bank exclusive access to BC's mailing list and on-campus kiosks. So GE pays BC a million a year to help with marketing ... hoping that if they sign a few students early, they'll grow into bigger accounts.

Bottom line, BC knows it's wealthy alums are loyal to high-end cards with rich perks/services/rewards .... Amex Black/Platinum; Visa Signature PLus Black; Platinum Delta; MC World. So BC will never make much money on an low-end affinity card, b/c BC's alums won't use the card ... and they don't borrow.

However, BC's

However, as part of the program, BC also sold

JBQ said...

I did read the update and it does say that GE pays a high fee for alumni information. The cardholders actually do pay very little as was stated by the reader.

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