M&T Bank Corp. is relaunching its own credit cards for consumers and small businesses, more than 12 years after it sold that business to a credit card specialist firm that marketed cards to customers on M&T's behalf.
The Buffalo-based banking company said Thursday that it will now offer both basic and rewards Visa cards for its retail customers. As of June 1, it canceled its existing credit card program that had been offered through Bank of America Card Services, formerly MBNA Corp.
The banks says it wants to meet customers' financial needs while better tying the card to the rest of their relationship with the bank. Currently the cards and loans are owned by Bank of America, not M&T.
"It's kind of stand-alone," said Richard S. Gold, executive vice president for mortgage and consumer lending at M&T. "Customers that just have the card are basically [Bank of America] credit card customers."
With the new cards, by contrast, M&T customers can view and manage their credit card account, or pay bills, through M&T's branches, ATMs, online banking or telephone call center, the bank said.
Customers can also use the credit card to link it with their M&Tchecking account for overdraft protection, so that debits that would overdraw their checking account and incur fees can instead be charged to the credit card, the bank added.
And the bank said the card can be used with M&T's new rewards program, combining points earned for credit card purchases with those earned from M&T's debit cards. Customers can use the points for cash back, gift cards, merchandise and travel vouchers.
The card also features Visa's pay-Wave system, so customers can wave it in front of secured card readers that use that technology, rather than swiping it.
Customers can apply for the cards by phone or in more than 750 bank branches in seven states and the District of Columbia, including as far south as Richmond, Va. Terms include an interest rate as low as 11.24 percent for the rewards card and 9.24 percent for the basic card. There's no annual fee.
Bank of America is notifying its 150,000 M&T cardholders that it will issue them a new card, with a Bank of America logo on it, but "our hope is to create a compelling proposition for our customers so that they embrace the new M&T card," Gold said. He said about two-thirds of them, or about 90,000, already have business with M&T.
However, M&T serves 2 million consumer households and small businesses. "That's why we're incredibly excited," he said. "There's plenty of opportunity just within our own footprint and customer base."
With its newest initiative, M&T is returning to a business that it once considered less strategic. Bank executives believe they need to unify their products and services so they can more fully serve customers. It has no plans to mass-market its cards.
"Our interest is selling cards as part of a broader bank relationship," Gold said. "There's a whole bunch of major improvements in the way we can provide credit card services."
M&T sold its previous in-house credit card program to Wilmington, Del.-based MBNA in 1998, preferring to outsource the specialized business rather than incur the expenses to maintain it. At the time, M&Twas one-fifth the size it is today, so it lacked scale to compete.
MBNA, founded in 1982, was a "monoline" credit card bank, so its only business was issuing cards, including on behalf of other banks, to their customers, and under their name. Such cards became common in the industry, especially for small and mid-sized banks, and M&T had such an "agent bank" relationship with MBNA.
However, MBNA was acquired in 2005 by Bank of America, which continued the relationship. But since Bank of America is also a retail bank with branches nationwide, it also competes directly with many of the banks it issues cards for.
Gold said that had nothing to do with M&T's decision. Rather, he said, the arrangement just "prevented us from providing the full relationship in terms of access and servicing."
"Although in an ideal world, MBNA never became Bank of America, it didn't become awkward to have Bank of America become a partner, but it was limiting," Gold said. "It just didn't enable us to go as far as we want in terms of the relationship with our customers. This gives us way more control over the customer experience."