Recently, my college-aged son signed up for his first credit card. He chose Capital One not because of their long history as a card issuer or their flashy TV ads, or even their state-of-the-art website. No, he went with Cap One for the same reason as that of tens of millions before him: a simple, preapproved direct-mail offer at just the right time.

It’s enlightening to see the process through the eyes of a credit newcomer. Even though he understands credit cards intellectually and has used debit/prepaid cards for years, a number of things were still less than obvious to him as he went about activating the card over the phone, using it for the first time, signing up for online banking, and paying his first monthly bill. For example:

• The initial card-activation process was a mystery to him. He did not expect to have to call the bank when the card arrived. And the conversation he had with the CSR was confusing. I heard only his side of the call, but evidently Capital One pitched both credit insurance and ID protection services. He successfully said no to ID protection, but to his surprise, the first bill had a 1% fee tacked on for credit insurance, which he absolutely does not want (it’s only a $300 credit line).
• He’s very concerned he’ll miss the payment due date, which seems so far into the future, given the lag in posting, combined with the grace period. The payment on his first charge was more than six weeks later. To him, it almost seemed to too good to be true, and also made it harder to remember.
• He doesn’t have experience writing checks nor does he even have stamps around the dorm room; so even the simple act of paying the bill each month is not as easy as it seems. I helped him set up his checking account for ACH payments (see #7 and #7a below), but I’m not sure that would have been obvious to him had I not been looking over his shoulder.
• I also helped him set up mobile and email alerts to remind him to pay, but again, without his father pitching in, I’m not sure he would have known to do that. He hasn’t set up alerts on his checking account because he didn’t know they existed.

My take: For the most part, things have gone smoothly, and Capital One has done a good job bringing him on board (see below). But it made a mistake with him, one that could ultimately cost the card issuer my son’s long-term loyalty, the apparent “misunderstanding” about his agreeing to add credit insurance to the account. 

And it only netted the bank $0.93.

I was surprised how upset my son was at the credit insurance fee tacked onto his bill. Even though it was less than a buck, he was determined to reach someone at the bank right away to get it removed and stopped. He felt that the bank used his naivete against him. He felt betrayed and preyed upon. That’s not a good way to start a relationship.

Capital One Online Banking/Card Sign-up Process
I took the opportunity to document Capital One’s online banking sign-up process. It was clean and intuitive and took just a few minutes.

Step 1: Terms and conditions (13 Feb. 2010)
Note: The first page, shown below, was reached through a link in an onboarding email message encouraging signup for online banking.

Step 2: Authentication

Step #3: Select username and password
Note: Email address was prefilled from the info from original online app

Step #4: Choose security questions

Step #5: Encouragement to sign up for estatements
Note: Default set to Yes; also, there was no incentive to go paperless,
even $1 might have swayed him

Note: You must call customer service to switch from paperless to paper statement, again a disincentive to choosing paperless

#6 Confirmation (with a dash of humor)

#7 Set up payment account

#7a Confirmation

My son is almost half way through his second year of college, so we figured it was time he had a credit card. He’s proved incredibly responsible with money, even avoiding dreaded debit card overdrafts so far. It’s a good time for him to start building his credit history. And because he flies cross-country to school, I feel better knowing he has an emergency line of credit in his wallet.

Unfortunately, his student checking account provider, Chevy Chase Bank, hadn’t offered him a preapproved MasterCard/Visa, so I’ve been watching his mail at home. It will come as no surprise that preapproved mailers to college underclassmen have been scarce. This summer he was courted by Discover Card and a higher-fee MasterCard (or Visa?).  But I was hoping for a preapproved fee-free MasterCard/Visa for maximum utility. 

This fall, Capital One (note 1) began to send my son MasterCard offers via snail mail. Right before Thanksgiving, the fourth or fifth piece in the series landed in our mailbox. He looked at it over the holidays and applied online for the card on Sunday. The fee-free card is no bargain for revolvers at 22.9%, but that’s to be expected in this economic and regulatory environment.

The mailer offered the option of applying by telephone, mail or online. But the latter was clearly encouraged with a red badge, a 60-second response time, and a personalized URL with my son’s name (e.g., John.Smith.getmycard.com).

Online application: The application process was a breeze. It was straightforward and fast and took less than five minutes, start to finish. The utilitarian online application design (screenshot 2) was easy to navigate and included ample embedded help, but no 800 number or online chat. The only unusual feature was the ability for users to select from about 16 different card designs. 

Because he was applying from a direct mail piece that included full Reg. Z disclosures, they were not repeated in the online app.

In total, it took about 4.5 minutes to complete the app process, and approval was granted in less than 10 seconds. My only complaint, a 22-digit offer and access code combination. Here’s the exact timing:

• 30 seconds — Type personalized URL and load website
• 30 seconds — Type 16 digit reservation number and 6-digit access code
• 3 mins and 30 secs — Complete application form
• 10 seconds — Wait for credit decision

Onboarding: The initial onboarding process was almost nonexistent. Cap One didn’t even send a congratulatory email on what is a major milestone of someone’s banking life: their first credit card. All he received was the tiny “Congratulations! You’re approved” screen at the end of the online approval process (see screenshot 3 below) along with instructions that his card would arrive in 7 to 10 business days. And there’s no way to access the account until the card arrives.  

Grade: Capital One gets an A for account-acquisition marketing and online app mechanics, but earns a B- for first impression, and an incomplete for onboarding so far.

1. Capital One personalized application screen (29 Nov 2009, 8 PM Pacific)
Note: To begin the process, the applicant enters a 16-digit reservation number and 6-digit code found on the snail-mail piece.

2. Online application

3. Congratulations screen

Note:
1. I didn’t realize until today that Chevy Chase is now owned by Capital One, which could be why my son has been receiving Capital One credit card offers. However, there has never been any mention of Chevy Chase or his checking account in the mailers. And one of the application questions was: “Do you have a checking account?”
2. For more info on how to create a winning online application, see our Online Banking Report: Online Account Opening published in June 2009.