'Toxic' Oil Cards?

CITGO latest supplier to see co-branded credit card killed by bank

Carole Donoghue, Petroleum Editor

HOUSTON -- CITGO is losing its consumer co-branded MasterCard. The company is the latest to join the ranks of refiners whose card is being canceled by Citi, CSP Daily News has learned.

CITGO marketers were told Monday that they will not be able to accept the co-branded CITGO MasterCard after February 29, 2012.

CITGO gave no explanation of the change in its message to marketers, saying only that it intends "to focus on the growth of our CITGO private-label cards."

Marketers must immediately remove any CITGO MasterCard materials, it said.

In a short question-and-answer bulletin sent to cardholders, CITGO said that Citi "has made the decision to discontinue" the card and the last day that they may use the card is February 29.

CITGO marketers said they are not surprised that the card is being canceled. "It's not going to mean much to us because we only have a few CITGO stations left," said one jobber. "But I think it's a good thing for us because proprietary cards are no-fee or low-fee, and we weren't doing much on the CITGO MasterCard."

Banks have been shutting down refiner co-branded card programs or cutting back the rewards offered because they regards the programs as unprofitable for the amount they must spend marketing them, says a credit card executive with one major oil company.

Oil cards are regarded right now as "toxic" by the banks, said the official.

Banks make their money on credit cards from finance charges, late fees and interchange rates, but those revenues streams have dwindled over the past two years as a result of regulatory reform and more cautious consumer purchasing behavior, he said.

Banks were willing to take lower interchange rates when they first negotiated oil company card deals but the advent of reward offers have reduced revenues by 50% to 60%, according to some estimates, he said. In addition, many co-brand accounts use their cards for gasoline purchases only and pay off their balances monthly, which means fewer fees for banks.

Citi killed off ConocoPhillips' co-branded MasterCard last September. The card accounted for only 0.4% of all ConocoPhillips' card sales, a ConocoPhillips marketing official said at the time. Sunoco's card was canceled last February by Citi, and Chase pulled the plug on Marathon's card in August. Chain marketers Wawa and RaceTrac also no longer have co-branded cards, sources say.