By  Wed Apr 18, 2012

The Barclaycard Ring Card Disrupts the Credit Card Industry

Barclaycard is now accepting applications for the new Ring card, which is proclaimed as the first “social” credit card. In addition to the adoption of simplicity and transparency, the Ring card shines for its extremely low-cost structure — a rare attribute in the credit card market.

The Ring card’s two-page card agreement, made up of only 1,038 words as opposed to the usual 7,215-word card agreements, originated from an idea through its cardmember community, said Paul Wilmore, managing director of consumer markets at Barclaycard US, in a phone interview.

Ring cardholders have the opportunity to share ideas for the card program — a community vote can turn those ideas into reality. They’ll also have a say in how the program’s profits are handled. For example, Ring cardmembers can vote collect the profits as a statement credit or donation to charity.

“We’re uniquely positioned to offer the Ring card,” said Wilmore. On top of taking the blame for causing the recent recession, banks have made unfavorable changes to products and services, which have angered many consumers.

While the social aspects are a novel approach, the Ring card’s pricing model may prove to be more disruptive to the credit card industry — the card has the potential to render the interest rates on all other credit cards irrelevant.

Scheme away

The Ring card carries no annual fee or balance transfer fee and charges a flat 8 percent APR on purchases, balance transfers and cash advances.

“The main value proposition for consumers is the low interest to help them manage their debt,” Wilmore added. According to a poll held during the Ring card’s alpha test, 80 percent of respondents stated that a credit card’s interest rate was the most important consideration.

Wilmore said that the Ring card’s lack of a balance-transfer fee offers major benefits to consumers. Rewards and cash back credit cards tend to carry high APRs to offset the cost of providing these perks. By moving the balances from these high-APR credit cards to the Ring card, consumers continue to earn rewards and cash back without having to pay more than 8 percent APR.

Instead of shopping for credit cards based on interest rates, consumers may focus just on annual fees and perks, because the only interest rate that matters is the interest rate on the Ring card. Essentially, Barclaycard becomes the recipient of interest payments that would have otherwise went to other card issuers.

Furthermore, Ring cardmembers can link their other credit cards so that they receive alerts when balances are due, and then be offered the option to perform a balance transfer — for an extended one-month grace period, said Wilmore.

This no-balance-transfer-fee feature was not a result of a vote by the Ring card community. Barclaycard US decided against the common practice of offering an introductory 0% APR, hitting customers with a 3 percent balance-transfer fee upfront, and then taking customers by surprise when the introductory rate ends. “That is not the kind of relationship we want with our cardmembers,” said Wilmore.

Not surprisingly, the practicality of the Ring card’s attractive feature is bound to an individual’s credit limit, which varies based on creditworthiness.

The credit score range of someone who is most likely to qualify for the Ring card is “relatively broad,” Wilmore said.

“It’s for people who are responsible with their credit — not people that would be traditionally known as ‘sub-prime’ and it’s probably not targeted to the super-affluent. It’s likely going to appeal to somebody who revolves debt all the time or occasionally and is trying to manage that debt in a smart way.”

It’s possible that the Barclaycard Ring card becomes the ultimate sidekick to all other credit cards. What do you think?

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