I recently noticed an influx of YouTubers promoting the VITAL card, so naturally, I decided to do some research.
At first glance, the VITAL card seems like an MLM or pyramid scheme for credit cards, but I don't think it's a scam. There are a few flaws in the model.
On the surface, the VITAL card seems like a great deal because you can earn money off your referrals and the people they refer. What most people don't realize is that the referral bonuses are based on how much each referral spends on the VITAL card.
The fine print on the referral bonus calculator:
"This calculator assumes your friends refer at least 4 people. Example is based on 100,000 total VITAL users with an average monthly spend of $1,500."
The calculator assumes that the average card user will spend $1,500/month. '
Most credit issuers earn money on:
- Annual fees
- Transaction fees
With the VITAL card, we're looking at the transaction fees. In this post, we're going to assume the VITAL card is either a Visa Credit Retail CPS, Visa Credit Retail Rewards Traditional, or a Visa Credit Retail Rewards Signature. To calculate the interchange rate, we'll take the average of the three card types.
- 1.82% Visa Interchange Fee (average from the three card types)
- 0.xx % Visa's cut (???)
- 1.00% Rewards paid to primary cardholder
Net before referrals
- 0.82% left over
The main issue is that if your referral chooses not to use their VITAL card, you will not make anything on referral fees.
The rational credit card consumer would not use the VITAL card because it only earns 1% on purchases when they could be using a card like the Citi Double Cash to earn 2%. If there is someone who dines out frequently, the Uber Visa card earns 4% cash back on dining.
The main reason why I wouldn't recommend the VITAL card is that it's functionally not optimal. If your referrals don't use the card, you won't get paid. At the same time, it doesn't make sense for you to refer friends to the card because they would lose out on cash back.
- Using 2% card instead of a 1% card = 1% loss in value
- The referrer is effectively taking that 1% value for themselves.
Recommendations to Improve the Card
a) 2% cash back on everything to be competitive with the market rate
b) Be the "millennial card" and work with relevant advertisers for paid promos
c) Can pitch "financial data" approach ("Facebook meets CSR")
Financially literate (prime) people who have substantial spend would never use VITAL. The sub-prime approach works well for interest farming (i.e., Comenity, Capital One).