The changes announced by Capital One yesterday are big news. The company’s talking up SBA lending, with the goal of getting small businesses (and hopefully, more people like you) to borrow money. The move is one of the most aggressive in the entire banking industry, and it’s also one of the most hopeful.
Small business owners and managers need capital to grow and expand, and most banks don’t provide it. Capital is necessary for business growth, and many small business owners and managers don’t have access to it. That’s where Capital One comes in. With a new business credit card for small business owners and managers, Capital One is providing the capital that small businesses need to grow and expand.
Small business owners benefit greatly from using Capital One’s small business credit cards. Used correctly, these cards offer these owners the opportunity to grow their businesses without the financial risks associated with less expensive credit cards.
Capital One’s Small Business Strategic Shift: Finance Small players are rewarded, while big players are rewarded.
on August 18, 2021 by Gary Leff
For new business cardmembers, Capital One is canceling the popular Spark Cash card and splitting the market into two separate products. The business path that seems to be painted for the issuer’s small company portfolio is intriguing.
- Spark Cash Plus is a new 2% cash back card for small companies that spend a lot of money. It comes with a $1000 incentive after $50,000 in spending in the first six months, as well as a $200 bonus every year the company spends more than $200,000 on the card. It’s also a charge card (pay in full, no spending restriction) with a $150 annual fee, rather than a credit card.
- Spark Cash Select has a 1.5 percent cash back rate, no annual fee, and a $500 incentive after $4500 in purchases in the first three months, or a 0% introductory APR for 12 months.
Small companies who spend less are given less cash back and the chance to cycle, while enterprises that spend considerably more are rewarded much more cash, essentially 2.1 percent (rather than 2% ) on precisely $200,000 in annual expenditure.
And Capital One is concentrating on the high-spending business sector while essentially eliminating income from revolve. Fees (such as yearly fees), intercharge (merchant swipe fees), and revolve (cardmembers paying interest when they don’t pay off their card in full each month) are how card issuers earn money.
Credit cards are a highly competitive industry, with the majority of interchange revenue going to the client with the best rewards program, while an issuer may only profit from revolve. Of fact, many of the most high-end rewards programs are aimed at consumers who are least likely to rotate their balances. That is, without a doubt, the situation with small companies.
Capital One is pitching Spark Plus as a way for businesses to spend more and offering a tool for cardmembers to test their purchasing power before putting a large charge on the card, in addition to moving to a “no preset spending limit, pay your bill in full each month” model, which is the first time the company has done so.
This was American Express’s play for a long time, but it’s one they’ve abandoned in recent years. They made their money on interchange and issuing charge cards for their own goods, but they’ve switched their focus to business and consumer cards, hoping to get a piece of the financing pie.
Is it any surprise to see Capital One first enter the premium travel rewards space with transferable points and reimbursement for TSA PreCheck, then prepare to launch a new travel portal after a $170 million investment in Hopper, and soon airport lounges – in other words, becoming more like the old American Express! – as Amex tries to become more of a lifestyle brand rather than a credit card?
Fortunately, Spark Miles (which convert to airline miles) seems to be still available if you’re seeking for a 2% rebate on a small business card from Capital One without the fee rise at this time.
More From the Wing’s Perspective
After a string of acquisitions that include the likes of Chegg, a textbook rental company, and USAA, a financial services provider, Capital One has been making significant changes to its business. In a bid to expand its customer base and promote the use of their products for small businesses, the bank has been shifting its focus from large enterprises to small businesses. In a new strategy, the bank will promote small businesses by providing them with higher credit limits and setting up lending targets, rather than just the amount of loans the bank is willing to write.. Read more about above wing and let us know what you think.
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