Second look programs are designed to give customers an additional chance to get a co-branded credit card. Those customers with little or no credit may have been denied or overlooked after their first credit card application. Second look programs are often run through a different card issuer and bank, and can expand credit cards into new customer segments.
Here’s how second look programs work:
- Alternative approval criteria: Instead of relying solely on a credit score, second look programs evaluate other factors such as income, employment history, banking data, or other financial behaviors. This helps lenders better assess the applicant’s ability to manage credit responsibly, even with a less-than-perfect credit score.
- Higher interest rates and fees: Since second look programs cater to higher-risk applicants, they often come with higher interest rates, lower credit limits, or additional fees compared to traditional credit cards.
- Path to standard credit: Successful use of a second look credit card can lead to credit score improvements, potentially qualifying the cardholder for standard credit products in the future with more favorable terms.
Second look programs are popular with retailers and some financial institutions looking to expand credit access to underserved or subprime consumer segments, giving applicants a chance to improve their credit profile through responsible card use.
Add debit to your second look program
For companies considering a second look program with a new issuing bank, there are options to expand the reach and success of the program — while retaining brand control and ownership. Offering a co-branded debit card at the same time gives consumers more choice, and can result in enrolling more loyal customers.
The case for co-branded credit is solid. Customers using co-branded credit cards buy more, more often. And many demographic groups shun credit in favor of debit, using debit more frequently, staying top-of-mind — and wallet.
Adding a co-branded debit option is straightforward. Applicants can choose which program best suits their needs, or if denied a second look card, can seamlessly apply for a debit card.
Why consumers use debit
Debit cards are completely funded by the consumer, so cannot be overspent and do not carry interest charges. Therein lies the attraction for those debt-wary consumers, or those who have enough credit cards. Frequently used for everyday purchases, debit cards play an important role in fiscal management for many.
Everyday purchases: Debit cards are widely used for regular expenses like groceries, dining, gas, and other daily essentials. Since they pull funds directly from checking accounts, debit cards help consumers avoid accumulating debt.
ATM withdrawals: Many people use debit cards to access cash from ATMs, either for convenience or when paying with cash is preferred.
Bill payments: Debit cards are also commonly used for recurring payments and bills, like utilities, subscriptions, and mobile services, allowing consumers to budget based on available funds.
Online shopping: For consumers who want the convenience of online shopping but prefer not to use credit, debit cards provide a secure way to shop digitally with funds they already have.
How debit cards are funded
Debit cards are primarily funded via direct deposit from checking or prepaid accounts. For those debit card holders who do not have accounts, funds can be added via cash deposits, direct deposits (paychecks), or through mobile app transfers.
Different funding methods carry different costs, settlement times, and fraud levels. Bank transfers and direct deposit typically carry the lowest cost and fraud risk, but also take one to three business days to settle. Card transfers and cash loading are typically more expensive, but settle immediately for instant spending. In terms of fraud, funding methods like mobile check deposit and card loading carry higher fraud rates. Read more on the different funding methods for co-branded debit cards, and how they impact customer acquisition.
Satisfying an appetite for debit
Illustrating the desire for a debit option, two large retailers offer credit and debit co-branded cards. Each option carries the brand, and offers attractive sign-up incentive and rewards for use.
Target offers a Circle Card (fka Red Card) in both credit and debit flavors. On the Target website, both card offers are side-by-side, with identical benefits and loyalty earnings. Marking its success, in 2022, 20 percent of Target’s revenue came from its own cards, with the debit card contributing over 11 percent of that total.
Walmart’s MoneyCard offers a debit option, including allowing cash loading at its physical stores. Earning cashback at stores and fuel stations, card holders can access similar benefits without credit risk.
Companies seeking to capture more customers, keep them loyal, and offer compelling credit-like benefits are increasingly adding a debit option, often in tandem with existing card and loyalty programs. When considering a second-look program to enroll more cardholders, adding debit is a logical step to attract — and retain — more customers by meeting their payment preferences.
