"Although balance transfer products are now synonymous with
the UK credit card market (UK consumers enjoying the longest
balance transfer periods in the world), it was in the United
States that balance transfer cards first appeared.
The first ever balance transfer card was launched by Signet
Bank (Virginia) in 1992, on the recommendation of two
consultants brought in to manage their credit card business,
Richard Fairbank and Nigel Morris.
Fairbank and Morris harnessed increasing sophisticated
computers to segment prospective customers using lifestyle
and credit file data. In applying these insights, they
demonstrated they could minimise card issuer losses by
targeting products to customers based on their particular
risk profile. Better targeting enabled them to scrap annual
fees for some customers (which were often charged to
mitigate the high risk of mass lending to relatively
un-profiled applicants). It also freed them to develop new
credit card propositions, including balance transfer cards,
which were primarily introduced as a customer acquisition
tool to target more affluent people.
Initially, their ground-breaking approach met stiff
opposition from senior executives trained in more
traditional banking methods, but when Fairbank and Morris
used it to fuel their outbound marketing strategy, combining
enhanced customer segmentation with compelling product
propositions, they quickly proved its worth.
In 1994 Signet Bank spun off its credit card business as
'Capital One', but it soon outgrew its parent. In 1995,
Signet Bank was bought by First Union Corporation, but
Capital One remained independent, becoming a big bank in its
own right.
From its roots in the United States, the balance transfer
concept quickly crossed the Atlantic as Capital One and
other new credit card issuers
entered the UK market in the
early to mid 1990s."