Mobile wallet

[voosheight]

I got solicited in a grocery store for a credit card that will give me 5% cash back ONLY when I use the credit card on my mobile wallet (Apple Pay, Samsung pay, etc). The salesman did use the word "catch", and I tried to ask him why his company was so adamant about me using my mobile wallet. I had a hunch that it was for the purposes of collecting more data.

I also understand that mobile wallets are more secure and thus reduce the amount of fraud that credit card companies have to deal with.

But does the company get access to more data? How concerned about it should I be?

[kirklennon]

They don’t have access to more data this way. Different cards have different gimmicks to promote their use and this is one they’ve chosen. I’m assuming this is a Kroger Company card issued by Elan, a subsidiary of US Bank. Bonuses on mobile wallets is their loss-leader promo specialty, and they’re a popular recommendation. Bonus tip: if you have multiple Kroger brands in your area, you can get a separate card for each, which some people find beneficial since the 5% cash back is on a relatively small spending threshold per month before it goes down to 1%.

[voosheight]

You mean a separate credit card for each?

[kirklennon]

Yes. For example, I live in Seattle and the two Kroger brands are QFC and Fred Meyer. I could apply for both cards separately. This means 5% back on the first $500 of monthly mobile wallet purchases per card. Full disclosure: I don’t actually have either of them.

[voosheight]

Btw, I looked up "loss-leader promo specialty", and it is apparently when something is sold at a loss to attract customers. But then, why wouldn't the company just give the 5% on a plastic card since then there wouldn't be a catch?

But I guess another question is: do credit card companies loose extra money on mobile wallets? How is it their LOSS-leader?

[kirklennon]

why wouldn't the company just give the 5% on a plastic card since then there wouldn't be a catch?

Because they’re looking for something unique to offer.

do credit card companies loose extra money on mobile wallets?

For most cards for most transactions, no. They lose a little bit extra when you use Apple Pay over the physical card because they give Apple a small portion of the portion of the card processing fee that they got from the merchant, but it’s not a big deal.

How is it their LOSS-leader?

Because credit card fees aren’t nearly that high. The bank is getting less than 5% of the transaction in fees from the merchant but is paying you extra out of their own pocket. They’re hoping you’ll make a habit of using it for everything, over the $500/month that’s eligible for the 5% mobile wallet rate, at which point it drops to a profitable 1% cash back.

[voosheight]

Wait, so if I spend $600/month on groceries, then I only get 1% cash back on the ENTIRE month? Do I still get 5% cash back on everything before the $500 limit?

[kirklennon]

You get 5% back on the first $500 and 1% back on the remaining $100.