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LivingSocial enters the rewards card business

  By May 8, 2012

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LivingSocial, the major competitor of daily deals giant Groupon, has teamed up with Chase Card Services and Visa to offer a different take on a rewards program.

The LivingSocial Rewards Visa Card will give LivingSocial users points on all purchases made anywhere, but the rewards will pack extra punch if the card is used to buy a LivingSocial deal.

The program is geared toward the daily deal addicted. Rules say card members earn five reward points for every dollar spent on LivingSocial purchases, three points for every dollar spent on dining and one point for every dollar spent on any other purchase.Essentially, LivingSocial fans who sign up for the card will get 5 percent back on all their purchases at the site.

“We are pleased to offer social-buying enthusiasts a product that enhances their shopping experience with the ability to earn rewards for their purchases,” Dan Dougherty, director of Chase Card Services, said in a statement.

For each 100 points, cardholders get one LivingSocial Deal Buck. As part of the first-year promotion, cardholders get 10 Deal Bucks for making 10 purchases each billing cycle. They’ll also get 30 Deal Bucks upon approval for the card.

Deal Bucks are applied to the cardholder’s next eligible purchase on LivingSocial, and there’s no limit on how many program participants can rack up.

Combining daily deals programs with their card offerings might be a good deal for issuers, as the daily deal crowd appears to be a safe bet in terms of creditworthiness.A September 2011 Lightspeed Research brieffound that, relative to the overall U.S. credit card holder population, Groupon and Living Social customers:

  • Are about 50 percent more likely to have household incomes above $75,000.
  • Have higher credit scores.
  • Make three times as many credit card purchases.
  • Are about twice as likely to pay their monthly credit card balances in full.

There are potential rewards for merchants, too, in the form of new and repeat business.
Daily deal companies, which offer online users everything from low-cost manicures to painting classes, to discounted international vacation packages, have been criticized because often the customer uses the deal and never returns.

The new credit card, however, will include incentives for repeat business, John Bax chief financial officer of LivingSocial, told Reuters. LivingSocial has not yet released specifics. Yet Groupon has approached the repeat-business problem by offering loyalty incentives (like extra discounts for returning to a business, or for spending a certain amount).

“We will use this as a platform to encourage people to come back to merchants,” Bax said. “Small and medium-sized local businesses will never be able to have their own credit card or loyalty program. We will be able to bring them the benefits of that.”The co-branded credit card is the first of its kind. Yet issuers and card networks have been making forays into the daily deals market for some time now. In March, for example, American Express launched a daily deals program with Twitter. MasterCard, meanwhile, announced in April that it would be partnering with the Chicago-based Local Offer Network.


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