Starbucks has announced that it is launching a Visa credit card which is co-branded and this will allow cardholders to accumulate points known as Stars. These points can then be redeemed for food and drinks at over 8,000 Starbucks outlets. Points will be earned when customers make purchases at any of the coffee chain’s outlets as well as other outlets where Visa is accepted. The credit card will be issued through Chase and will attract an annual fee of $49.
Once interested individuals apply for the card and their application is approved, they will get a digital card on their Starbucks app. Between seven and 10 days later they will receive their physical card. Additionally a prepaid card will be launched by the coffee chain in April for those who are unable to qualify for a credit card or don’t want one.
Named after the coffee chain’s loyalty program Starbucks Rewards Visa Card will see cardholders automatically become members of the loyalty program. Loyalty points earned will expire after six months. In the initial three months, cardholders will get 2,500 Stars for spending $500. One Star will be earned by spending $4 at other outlets other than the coffee chain’s. cardholders will also receive eight free beverages or foods per year.
Currently the number of Americans estimated to possess a credit card has reached 174 million with approximately 141 million carrying a balance on the card. On average these balances are approximately $5,483 according to TransUnion, a credit reporting agency.
The launch of Starbucks Rewards Visa Card comes in the wake of the coffee chain’s stock being downgraded from outperform to market perform by Bernstein. According to a Bernstein analyst this was because the strong growth recorded by Starbucks in China will not keep up with stagnating sales in the United States.
“The business mix is clearly shifting toward China … just not fast enough to offset the US. While we think SBUX’s China business can contribute meaningfully to growth over time, the US’s slowdown will overwhelm it,” Sara Senatore, an analyst at Bernstein, wrote in a client note.
In the most recent quarterly report Starbucks indicated that same-store sales in the world’s most populous country increased by 6%. During that period same-store sales in the United States increase by 2%. In both cases this was worse than expected. For fiscal year 2017, sales in China contributed about 8% to the segment earnings of Starbucks.