Credit card companies have been poaching revolving balances from each other for years primarily through direct mail. It helped boost the share of early movers, such as Capital One. But once the tactic was widely copied, it dragged margins down for all.
The same technique has been used online with dedicated balance-transfer microsites posted by Bank of America and others beginning in 2003. The online balance transfer is better than paper because it can be interactive, prompting the user to make additional transfers, or to correct errors in the information input. However, it still requires the user to make a trip to the website to make the transfer.
Enter E*Trade’s new Mileage Maximizer program, launched with a page-dominating color ad in Tuesday’s Wall Street Journal. With the Mileage Maximizer, the bank encourages users to make purchases on their existing non-E*Trade rewards card, then have the balances AUTOMATICALLY swept to an E*Trade 8.9% APR line of credit each month. The bank’s website is used to initiate and maintain the transfer process. But like recurring bill payments, once the sweep is established, it will occur each month with no interaction by the user.
E*Trade may well be the most innovative online financial services company. Here are some of the industry firsts they’ve logged over the years:
- 2001: MyLoanTeam from E*Trade Mortgage (OBR 73)
- 2003: Real-time funds transfers (OBR 96/97)
- 2005: 7-year online transacation archives (OBR 118)
- 2005 (March): First U.S. bank offering security tokens for online access (NetBanker 2 March 2005)
- 2005 (December): First virtual rewards card, Mileage Maximizer
Editor’s Note: Mileage Mazimizer was awarded an "OBR Best of the Web" in our report on online lending published Jan. 31, 2006 (OBR 126).