The Social Swipe: How Credit Cards Are Using Social Media

NEW YORK (MainStreet)  — Social media has played a major part in company advertising campaigns and customer service initiatives during the past few years, and 2011 saw several credit card issuers using these networks as product enhancements. 

American Express (Stock Quote: AXP) launched its “Link, Like, Love” service – which offers discounts and experiences to cardholders based on their “likes,” interests and social media connections – back in July and followed it up with the Gift Chain in November. This promotion allowed cardholders to earn prizes off of holiday gift purchases that could be shared, in certain instances, with their Facebook friends.)

Earlier this year, Citi (Stock Quote:C) launched a Facebook application allowing cardholders to pool rewards points and put them toward a common goal, such as a family trip or a large charitable donation.

Experts say these promotions will proliferate throughout 2012 since they offer many opportunities that traditional advertising campaigns do not.

“Issuers are going to devote more of their marketing budgets and resources to social media campaigns because they are more cost effective and more easily tracked,” says Curtis Arnold, founder of CardRatings.com. “They allow companies to engage directly with customers and get instantaneous feedback.”  

Major issuers acknowledge that social media has become an active part of their business model, but insist their efforts are concentrated in providing a better experience for existing cardholders. 

“Acquiring new customers is not the objective of our social media strategy,” says Laura Rossi, a spokeswoman for Chase. “Our social media strategies are designed to build a sense of community and to facilitate interactions with the Chase card brands customers are passionate about.”

While the issuers we spoke with refrained from sharing their next big social media campaigns, they did say more social is on the way in 2012.

“Look for us to continue to roll out a series of never-before innovations in the space that bring even more value to our [card members] and merchants,” says Leslie Berland, senior vice president of digital partnerships and development at American Express.

Ben Woolsey, director of marketing and consumer research with CreditCards.com, expects these promotions to move onto mobile channels as issuers look to capitalize on partnerships they have with wireless providers.
“You’re going to see more apps,” Arnold says.

Customers should also expect Facebook to continue to be a major player.

“These initiatives are a clever way to extrapolate engagement with the brand from someone's familiar social network,” says Robin Carey with SocialMediaToday.com.  “Think of it as ‘friends-and-family’ marketing in the Facebook era. Look for more ways that Facebook will become the de facto medium for incentives and social reinforcement.” 

As these promotions proliferate, here’s what you should know before participating in them.

It’s All About the Fine Print

Credit card agreements have become known for what’s buried in the fine print, but Arnold says the campaigns that he has seen thus far seem to provide strong incentives for cardholders.

“These campaigns don’t have a downside in terms of the ‘gotchas,’’’ Arnold says, but that doesn’t mean you don’t need to read through their user agreements, he adds.

You should also make sure to check the company’s privacy policy before registering for a promotion that requires you to share personal data.

“Make sure you know where the information is going to go,” says Adam Levin, chairman and founder of Identity Theft 911. You also will want to check if the company intends on sharing anything – whether it’s your email address or your spending data – with anyone else you wouldn’t otherwise want them to share it with.

Take Proper Security Precautions

Anytime you enter your personal information online, including your credit card number, you run the risk of having that information compromised.

To minimize the chance of fraud, Levin suggest making sure you only enter information into encrypted websites, which can be determined by the https:// at the start of a URL or by a small lock at the top of the Web page.
You should also refrain from clicking on links inside the body of the email, Levin says, since hackers are known to send emails under the guise of a legitimate company in an attempt to get people to download malware onto their computers.

Instead, he suggests going to the company website directly to sign up for the promotion. Once you are registered, make sure to check your credit card statements regularly for the campaign’s duration. That way, you can catch any fraudulent charges as soon as they occur, should an actual hack take place. 

A Free Sweepstakes Isn’t Always Free

According to Woolsey, the Internal Revenue Service requires taxpayers to report prizes totaling $600 or more when they file their taxes.

Luckily, he says that most social media promotions mirror credit card rewards programs, which are essentially billed as a rebate and are not going to require you to pay taxes on the rewards at the end of the year. 

“It’s the structure of the promotion that matters,” he says.

As such, consumers should be aware that a social media sweepstakes that involves, for example, raffling off a free car to one person who “likes” a Facebook page, will require taxes to be paid on the prize.

You can find additional information on what to do should an online data breach occur in this MainStreet article.

—Jeanine Skowronski is staff reporter for MainStreet. You can reach her by email at Skowronski.jeanine@thestreet.com, or follow her on Twitter at @JeanineSko.