Capital One, Walmart rolling out 2 cards offering 5% back

Dive Brief:

Capital One and Walmart are launching two new credit cards Sept. 24 — one to use wherever Mastercard is accepted, and the other limited to Walmart purchases, the companies said Wednesday in a press release.
Both offer customers 5% back on Walmart.com purchases, including grocery pickup and delivery. But the in-store cash-back offer is time-sensitive: The card can give customers 5% back for 12 months if they sign up for Walmart Pay, the company's mobile payment option. Beyond that time frame, cash back for Walmart purchases reverts to 2%. The cards also offer 2% back on restaurants and travel, and 1% back everywhere else, according to the press release.
The cards will help Walmart keep pace with similar products from competitors Amazon and Target. The Amazon Prime Rewards Visa Signature Card offers customers 5% back on Amazon and Whole Foods purchases, 2% back at restaurants, gas stations and drug stores, and 1% back on all other purchases, while Target's REDcard offers 5% back on Target purchases, according to CNN.

Dive Insight:

The new cards are a step up from Walmart's previous offerings through Synchrony Financial, which featured 3% back on Walmart.com purchases and 1% back on in-store Walmart purchases.

Walmart sued Synchrony for $800 million in damages in November, four months after agreeing to partner with Capital One on new cards. Walmart alleged that Synchrony underwrote the $8 billion portfolio in a way that exposed the program to significant credit risk, American Banker reported. Synchrony, in turn, accused the retailer of promoting the program insufficiently. Walmart dropped the suit, but the conflict marked a messy end to a 19-year partnership.

Walmart is expected to absorb 88% of the losses on that portfolio, with Capital One picking up the other 12%, according to a research note published Wednesday by Bill Carcache, an analyst at Nomura Instinet, according to American Banker.

Current cardholders will be converted to the new cards starting Oct. 11, and updated cards are set to arrive by mail in November. The cards offer no annual fee and annual percentage rates of 17.99% to 26.99%.

Customers can apply through Walmart's website or app, or through Capital One's website. Users can fill out an application via their mobile device and can access the card immediately once approved. They also can load the card into Walmart Pay or into the Walmart app before the physical card arrives in the mail — much like the functionality of Apple's recently released Apple Card, according to TechCrunch.

Customers will receive purchase notifications, security alerts and 0% fraud liability through Capital One, and the ability to lock/unlock a lost or stolen card from the Capital One app, according to the press release.