5G Wars: Verizon strikes back with generous new credit card

America’s “Big Three” wireless companies are competing fiercely for your monthly wireless fidelity, especially as the industry begins to roll out 5G technology across the country.

The two main factors driving customers’ purchasing decisions for wireless services are generally, one, the strength of the network, and two, the price of the plan. American leader in postpaid subscribers Verizon (NYSE: VZ) has historically had one of the most expensive monthly plans, but also the best quality network, justifying its premium price. However, the differences between different 4G wireless networks are not as great today, and the multi-year transition to 5G could allow competitors to leapfrog potentially Verizon for the crown of the wireless network.

However, Verizon has just introduced a customer-centric innovation that is very clever, and that could potentially tie its affluent customers more closely to Verizon’s service – all technically without “slashing” prices.

Verizon has just unveiled a generous new credit card. Image source: Getty Images.

The new Verizon Visa card

Verizon has just launched a new credit card, which works on the Visa (NYSE: V) credit card network, and whose loans are guaranteed by a third-party credit card lender Synchrony Financial (NYSE: SYF). The card offers pretty generous cash back rewards on many things people use every day, including 4% off groceries and gasoline, 3% on restaurants, curb delivery and pickup, 2% on Verizon purchases and 1% on all other purchases. While there are some cards that offer up to 5% cashback for certain categories, getting 4% back on large purchases, high frequency purchases such as groceries, and 3% on restaurants is a pretty good deal. especially for a card that has no annual fee.

However, there’s a catch: Reward points aren’t actually “cash back”, but rather “Verizon dollars,” which can only be redeemed for Verizon products and services. New Verizon card customers can also earn up to $ 100 in 24-month wireless credits (or just over $ 4 per month) when they sign up, and Verizon cardholders can use the card. for Verizon’s automatic payment discount, which can add up to $ 10 per month on the monthly bill. Normally, Verizon needs a debit card or bank account to sign up for automatic payment.

Still, for Verizon customers, the savings of 4% on groceries and 3% on restaurants could represent a significant discount on their monthly Verizon bill or on purchases of new devices.

Why Verizon is doing this

Verizon currently has the most postpaid mobile wireless customers of any other wireless service provider, with 89.9 million postpaid wireless connections last quarter. However, Verizon also saw a slight decline in its overall postpaid phone base amid fierce competition in the largely saturated US wireless market. This likely prompted the company to look for ways to tie existing customers more closely to the Verizon ecosystem and reduce the overall churn rate, all without having to technically lower prices. In wireless, it is much more expensive to acquire a new customer than to keep one.

In this light, the card product certainly makes a lot of sense. Since Verizon’s customer base also leans toward the more affluent, given its higher price tag and top-notch coverage, a card was likely a compelling proposition for financial partners Visa and Synchrony. While it is not clear exactly what the arrangement is between Verizon and Synchrony, it is likely that Verizon will not “sacrifice” Verizon’s dollar rebates, as those payments will likely come from Synchrony, which aims to raise more money. ‘interest and charges on card balances. that it does not earn in points.

Thus, the card appears to be a rather elegant solution for Verizon to keep a tighter grip on its core wireless customers.

But will it work?

Of course, Verizon isn’t the only one wireless telecommunications company offering generous benefits to keep customers in the ecosystem and pay their monthly wireless bills. AT&T (NYSE: T) give the new one HBO Max streaming service to certain subscribers of its broadband plans and its Elite Wireless telephone plan. During this time, T Mobile (NASDAQ: TMUS) usually has a lower monthly subscription price, includes Netflix (NASDAQ: NFLX) with certain wireless plans, and was itself the first to offer T-Mobile financial benefits, with the introduction of a high-yield checking account called T-Mobile SILVER Last year.

While Verizon has also offered media benefits with its phone plans in the past, as a free year of Disney+ (NYSE: DIS), the new card, officially launched on Friday June 26, is its first real foray into financial products. And while the card certainly has generous benefits, it’s unclear whether they’ll be enough to keep hard-to-please and cost-conscious wireless customers in Verizon’s premium phone plans.

Expect to see more and more benefit programs from the “big three” mobile carriers now that the industry has consolidated to just three players as a result of the T-Mobile-Sprint merger. While it can be a competitive struggle for the companies involved, customers should be careful – there could be some great deals to come in the months and quarters to come.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

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