Walmart WMT, +0.81% on Wednesday is rolling out a new credit card designed to compete with cards from Apple AAPL, +0.36% and Amazon AMZN, +0.81%.
The Capital One Walmart Rewards Mastercard MA, +0.79% will become available to shoppers starting Sept. 24. The credit card’s rewards represent an upgrade to Walmart’s existing credit card, and was designed with online shopping in mind.
The card comes with an introductory offer of 5% back on purchases made at the big-box store using Walmart Pay, the retailer’s mobile pay app, for the first 12 months after approval. Like other Capital One cards COF, -0.54%, it comes with no foreign transaction fees. It also has no annual fees, but does carry a variable annual percentage rate, which is currently between 17.99% and 26.99% depending on the person’s credit.
The benefit is evocative of the Apple Card, which Apple and Goldman Sachs GS, -0.60% launched earlier this year. That card offers 2% back on any purchases made using Apple Pay — a feature that experts say was designed to promote adoption of the mobile pay technology.
Read more: The Capital One hack exposes the dark side of racking up credit-card rewards
After the introductory period, shoppers using the card can still get 2% back when shopping in-store.
The credit card also offers:
• 5% back on purchases at Walmart.com, including Walmart’s grocery pickup and delivery service
• 2% back on restaurants and travel, which includes airfare and hotel purchases
• 1% percent back on all other purchases
In addition to the Capital One Walmart Rewards Mastercard, the two companies are also rolling out the more traditional Walmart Rewards Card. That card offers a similar rewards structure:
• 5% back on purchases made at Walmart.com and on the Walmart app
• 5% back for using Walmart Pay in Walmart retail locations for the first year after approval and an 2% back on in-store Walmart purchases after that
• 2% back at Walmart Fuel Stations
Shoppers who already have one of Walmart’s store cards will automatically be converted to one of the two new cards beginning Oct. 11. These card holders will be eligible for the introductory offer and will receive 5% back if they load their card into Walmart Pay and use the mobile app when shopping at brick-and-mortar locations.
Walmart Retail cards aren’t advisable for all consumer
Shoppers can still apply at check-out with a store employee, but they can also sign up online or via a text message sent to their smartphone. After sign-up, most consumers will either be approved or denied within minutes. If approved, they will immediately receive their credit-card number digitally. This will enable them to shop with the card online or using Walmart Pay.
But some experts are concerned that people with riskier credit histories may be more likely to take out the card. Research has also shown that retail cards are used by a higher number of people with lower credit scores, and these consumers are more likely to go into default on their credit-card debt.
Walmart and Capital One declined to provide specific figures for the credit scores they would consider for the card during a press call, but Daniel Mouadeb, Capital One’s senior vice president and head of Walmart partnership, said they were targeting consumers with “good to excellent credit.”
“Walmart’s cards also need to be viewed through the eyes of its typical customer, which generally skews lower in terms of income and credit quality,” Rossman said. “Walmart’s credit cards will presumably be much easier to get. In that context, the rewards look more attractive, especially if you shop at Walmart a lot.”
Read more: The $3 billion mistake Americans are making with their credit cards
The new cards are less competitive when compared with the offerings from other retailers. Walmart’s 5% back in-store rewards benefit is only offered for a limited time with Walmart. Target’s REDCard TGT, +0.30% offers 5% back in store and online indefinitely, and the Prime Rewards Visa Signature Card from Amazon offers 5% back at Amazon.com and in Whole Foods, which could prove more useful depending one where people shop.
A general cash-back credit card, such as the Citi Double Cash Card C, -0.50%, offers 2% back on all purchases, according to Ted Rossman, industry analyst at CreditCards.com.
How Walmart’s new credit cards stack up
The new cards represent an improvement over Walmart’s previous offering. The Walmart Credit Card, which can only be used at Walmart, only offers 3% back for online shopping at Walmart.com and 1% back for in-store purchases, according to Credit Card Insider.
“These are the richest rewards we’ve ever offered our customers,” Daniel Eckert, senior vice president of Walmart services and digital acceleration, said during a press call ahead of Wednesday’s announcement.
Also unlike Walmart’s previous offerings, consumers have more flexibility with their rewards than simply shopping in store. The points they earn can be used as cash back or to erase previous purchases. Additionally, card holders will have access to a rewards portal where they can redeem the points they earn for travel or gift cards.
Shares of Walmart are up 6.26% over the past three months, while shares of Capital One are up 2.78%.Comparatively, the Dow Jones Industrial Average DJIA, +0.13% and S&P 500 SPX, +0.26% are up 2.44% and 3.01% respectively over that same time.
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