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« It's a card Jim, but not as we know it | Main | Form and function »

Why?

By Dave Birch posted Nov 19 2010 at 5:32 PM

[Dave Birch] Why do you pay the way you pay? Why do you choose certain cards and why do you choose the subset of those cards that you carry around? What is in your wallet? I saw this, and began thinking...

So I polled the Credit Slipsters, and a few other people who teach payments law (some of whose responses will appear in comments to this post), and here is what they said about what they carry and how they pay.

[From What's in Our Wallets? - Credit Slips]

It was very illuminating to see the answers and to reflect on the combination of marketing, economics, psychology and technology that drove the choices, so I thought it might be fun to repeat the experiment in the Digital Money playhouse and see if anyone would join in (please comment) below. I'll go first.

I actually have three wallets: I call these my travel wallet, my main wallet and my "London" wallet. My main wallet contains four cards:

  • A British Airways American Express card, which is my default business card. I travel a lot and this card gives me BA miles. But more importantly, if you spend more than £10,000 per annum, it gives you a free BA complimentary flight: since I have so many miles, this means that last year (and this year) I will get a free first class flight anywhere in the world. For a humble salaryman such as myself, this is a wonderful perk.
  • A John Lewis MasterCard, which is my default non-business card. It has 1% cashback in John Lewis vouchers: last month, this meant a nice surprise in the post: £80 off our weekly shop in Waitrose. Actually, as I write, it isn't in my wallet because John Lewis called me up a couple of days ago and said that my card details had been used to buy something on Yahoo in a transaction I didn't recognise, so they've cancelled our cards and are sending us replacements.
  • A Barclays Visa debit card, which I only ever use at the ATM. I never, ever, buy anything with my debit card and I have the slightest idea why anyone else does either.
  • A Visa prepaid card. It's always useful to have a prepaid card to hand. Now and then the kids will need to go to the shops to get something -- the Bluetack, folder and card for the school project to be handed in the next morning -- and it's convenient to be able to give them a card instead of rummaging for cash or going to the desktop to FPS money to their accounts.

I don't always take this wallet with me. If I only going into London for meetings, I have a small cardholder that I call my London wallet and carry in my back pocket. This only contains loyalty cards for the main coffee chains and my Barclaycard OnePulse contactless Visa card with Oyster built-in. This is a brilliant card: tubes and buses and it auto-reloads from my Barclaycard account.

My travel wallet changes every time I travel: I use it to carry foreign cash, plus prepaid cards. So, if I'm in the US or elsewhere, it will have my stripe Travelex Visa US$ prepaid, if I'm in Europe, it will have my chip Thomas Cook MasterCard € prepaid card. If I'm going somewhere that I have transit card for (eg, SF, Singapore) then I put the transit card in it. I had my main wallet stolen in Brussels a few years ago, so now I leave my main wallet locked up in the hotel and I'll only take one of the cards out that and put it in my travel wallet if I know I'm going to buy something expensive, such as dinner for one of our valued clients.

None of the above are my favourite though: that's still my MasterCard PayPass prepaid contactless sticker on the back of my iPhone. So far, I have twice forgotten my wallet when I go to the office (because I cycle to the office, so I sometimes forgot to put the wallet in my cycling rucksack) but remained smugly indifferent, because I can pop out for coffee and a sandwich in Guildford and pay with my sticker. I never forget my phone, and if I did, I'd go back home and get it.

My payment choices are, I think, pretty mercenary. I'll go with the best rewards deal or the best cashback, generally speaking. The two cards that I use all the time where this isn't true are the OnePulse card, because it's so convenient to go around with just the one card for travel, for QSR contactless and for regular chip & PIN purchases, and the PayPass sticker because it's always on my mobile and therefore always on my phone (and, frankly, because it's fun and cool to astonish other shopppers by paying with your iPhone). OK, I've been honest and open. Your turn.

The question I want to answer by looking at this stuff is this: which organisation can persuade me to get rid of one of these cards and replace it with one of theirs without offering me more "cash"? Here are a couple of viable candidates: Waitrose and Apple.

Waitrose is a candidate because we spend a lot of money there, because I always use my John Lewis card there (not just to pay - it unlock the scanner for self-checkout as well). Why would Waitrose want to replace my John Lewis MasterCard? Well, remember that retailers are warm to disconnected debit, and as noted some time ago when the CapitalOne disconnected debit experiment in the US was terminated, it wasn't because of the retailers.

My wife’s visit to Target this week prompted a revisit to the decoupled debit space. Target’s value proposition: hand me your check and sign a release form, you will then receive a RedCard linked to your checking account and good for 5% off all future purchases.

[From Decoupled Debit « FinVentures]

If Waitrose offered me a 5% discount to ditch my MasterCard and pay from my current account but not visa my Visa Debit card, then my mercenary calculations would dictate an immediate shift in payment behaviour. We've been shopping at the same branch for many, many years: I'm sure their system wouldn't even bother trying to "authorise" the transaction. If we stiff them, we can't buy groceries at Waitrose: middle-class shame will be far more effective than the police plastic card fraud unit at managing fraud in this environment.

So Waitrose could win by playing the mercentary card. Apple, on the other hand, could do it the other way by adding even more convenience to my cool POS experience and replacing my contactless friends with it's next iPhone. If the iPhone comes with NFC built in, so that I can simply download an Oyster app and a Barclaycard app, then they will replace my OnePulse and my PayPass sticker in one go.

These opinions are my own (I think) and presented solely in my capacity as an interested member of the general public [posted with ecto]

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Comments

Merchants liked decoupled debit because it cuts out schemes: Waitrose's card would be "on us" and routed through direct debit.

I have four in my cardholder;

- First Direct Visa debit - UK ATM cash, only.

- Barclaycard Visa Credit - 1.5% cashback on groceries and petrol - this is the family/joint card.

- Egg Money MasterCard Credit - 1% cashback on my personal spend.

- Lloyds Duo Amex Credit - 1 Air Mile for each £10 spent - I use this for business expenses. With Air Miles I don't have to pay taxes on flights.

If going abroad, I used to replace the Visa cards with Nationwide Visa cards - Debit for ATMs and Credit for spend. Sadly, they both now charge fees so I use a Post Office Credit Card for spend and a preloaded Halifax Clarity Credit card for cash - neither of those attract fees, yet.

I have a contactless prepaid sticker on my phone. It may look cool, but over 1% to load cash is rather less cool and I don't bother with it anymore.

All pretty mercenary.

I also carry around a One Pulse card in my Oyster wallet thingy for when I go to London. It is just about to expire but, interestingly, it's the replacement One Pulse card that will go in the bin - it's more hassle to change Oyster card account than lose the payment function. Gosh, shock, horror - transit kills payment!

Your wallet choices are very rational. May I suggest though that you look at another card for your international travel. It is not widly known that the exchange rate you pay on forex card transactions varies from issuer to issue (by as much as 2%). A Nationwide credit card is probably your best bet.

In the above example I don't understand the motivation Waitose has for changing the status quo. They are happy you are more likely to shop at Waitrose to get cashback. What is their motivation to want to move to decoupled debit (which is what a credit card with the full balance paid off by DD monthly is anyway)?

I've only got the one handbag though, so it's swings and roundabouts.

Good grief, do you not value the time you take setting up all these accounts and making all these choices? I two credit cards, one home (john lewis) one business, and a debit card for getting cash out. Plus Oyster and cash. It's bad enough changing handbags, I couldn't do with changing wallets as well.

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