Credit-card issuers are on the hunt for new customers again.
Marketing efforts evaporated last year, as issuers coping with record losses closed millions of accounts and slashed the credit lines of millions more. But now direct-mail offers are starting to pick up, including those with low teaser rates and generous rewards.
The number of mailings in the second quarter is expected to increase 136 percent from the year earlier, to 988 million, according to Mintel Comperemedia, a Chicago research firm.
Though still well below the 1.53 billion offers that went out in the second quarter of 2008, the upward trend is likely to continue, with some issuers planning to increase their spending on marketing in coming quarters, says Andrew Davidson, a senior vice president at Mintel.
One change from before the financial crisis is which consumers are receiving the offers, though. These recent pitches are not ending up in "the mailbox of every customer," says John Stilmar, a director who follows credit card issuers for SunTrust Robinson Humphrey in Atlanta. In an "upmarket shift," issuers have raised underwriting standards and are trying to win higher-quality borrowers.
David Nelms, the chairman and chief executive of Discover Financial Services, told analysts in June that it planned to significantly increase marketing spending this quarter because of greater confidence in consumer credit conditions.
"We will be focused both on expanding our wallet share of our existing customers as well as attracting more new customers," Nelms said in an interview after the Riverwoods, Ill. issuer reported its second-quarter earnings. The increased spending would be across direct mail, Internet and television advertising.
A few large issuers have primarily driven the surge in direct-mail volume.
Of the second-quarter offers Mintel projected, JPMorgan Chase & Co. accounts for 33 percent of the volume. It accounted for just 8 percent of the year-ago quarter's volume.
Chase spokesman Paul Hartwick says the issuer is focusing on several business segments: affluent, mass affluent, small business and partner products.
It recently has been marketing a Southwest Airlines Co. co-branded Visa credit card that lets new users earn a free flight after making their first purchase—no matter how small the transaction.
Chase has been among the more aggressive in using promotional interest rates, Davidson says.
Concerns that such perks would be eliminated and annual fees would become prevalent have been largely unfounded so far, he says.
For example, Mintel projected that 34 percent of the direct-mail offers from Chase in the second quarter would include an annual fee compared with 54 percent in the year-ago quarter.
Similarly, it projected that 24 percent of the offers from Citigroup would include an annual fee compared with 52 percent a year ago and 57 percent of American Express Co.'s offers would include an annual fee compared with 90 percent a year ago. A Citi spokesman says the company is putting more emphasis on promotional rates and no-annual-fee offers.
Capital One has beefed up its loyalty offerings this year with its Venture and Venture for Business travel rewards cards.
Both cards earn two miles per dollar spent and have no limit on the number of miles a user can accumulate. Both also offer the ability for cardholders who spend $1,000 in the first three months of opening the card to earn 10,000 bonus points.
"A key area of focus for Capital One is the higher-spend customer segment," spokeswoman Pam Girardo says.
Wells Fargo, which focuses its card marketing on existing bank customers and does not use direct mail to acquire accounts, is hoping to grow the business by attracting new card users this year and next, says Mike McCoy, the president of consumer credit cards for the San Francisco banking company.
As a result of new rules in the Credit Card Accountability, Responsibility and Disclosure Act, McCoy says issuers must "do a much better job in customer segmentation" when it comes to marketing specific card features.
Wells Fargo is evaluating its card products, including its loyalty and rewards programs, McCoy says, but he declined to discuss specifics.
