In Saturated Card Market, Analyst Says No Annual Fee, APR Still Do The Trick

Register now

What does it take to get members to act on a card solicitation in a market that is already oversaturated?

Not too surprisingly, one analyst said it comes down to no annual fee and the card's APR.

Chuck Price of the Raddon Financial Group (RFG) told the TNB Card Services Executive Conference that an RFG survey of consumers who had recently added a credit card found that 45% of consumers pointed to the lack of an annual fee and 39% cited a lower interest rate as their reason for adding the card.

Cash-back rebates and a higher credit limit were cited by 13% and 10% of consumers respectively, while frequent flyer miles were the motivation for only 8% of consumers. (Percentages add up to more than 100 due to multiple answers by survey respondents.)

According to Price, existing members are the most likely to open a credit card relationship, and those members who do have cards tend to have closer relationships with their credit union, using more of the credit union's range of services. Card households, especially premium card households, are among the best targets for deposit and loan growth, he noted.

Credit card marketing is far more successful than marketing other financial services, Price said. The survey found that 38% of households report that they obtained a credit card as a result of a direct mail solicitation.

Other financial pitches, such as for debt consolidation, student loans, car loans, and others, have only about a 2% success rate.

Among the survey's other findings:

* More than eight out of 10 U.S. households hold one or more credit cards.

* The average balance for a credit union credit card account is $1,832, but for gold cards, that average is $2,708, while for platinum cards, it is $3,696

* Over the past two years, credit card dollar volume has grown at a steady annual rate of 3%, standing at $739.4 billion as of November 2003

John Reap, president and CEO of TNB Card Services, said his company has found similar results in surveys. "Time after time, we find that marketing credit cards to our clients' members not only increases the number of people holding cards, but creates strong relationships," Reap said. "With our product offerings, portfolio expertise, and our marketing solutions, we have been able to help our clients grow in membership, card income, loans and deposits, and most importantly in customer loyalty."

In separate remarks, Ruth Ann Marschall of Mastercard said the rise in use of debit cards has created a tremendous opportunity for credit unions to capture regular, recurring payments. Marschall cited a nearly 50% increase in use of debit cards over the last four years, said consumers tend to use debit cards for weekly purchases, preferring credit cards for high-end purchases.

She cited a "huge opportunity" for recurring payments and creating an annuity stream by getting members to use cards to pay their mortgage, rent, and all of the bills that Americans typically take care of monthly.

For reprint and licensing requests for this article, click here.
MORE FROM AMERICAN BANKER