Credit scoring techniques have enabled some card issuers to grow rapidly in the past three years without the typical surge in chargeoffs, according to Standard & Poor's Corp.
Such issuers as Signet Banking Corp. of Richmond, Va., Colonial Bank USA of Claymont, Del., AT&T Universal Card Services of Jacksonville, Fla., and First USA Inc. of Dallas marketed aggressively and grew at roughly double the industry pace, said an S&P analyst, Tanya Azarchs.
According to her report, released Monday, these fast-growing companies were able to beat what is known as the "credit card curve" - a spike in chargeoff rates that often occurs 12 to 24 months after a spurt in new accounts.
In the past, "Whenever someone launched a card campaign for new accounts they got a lot of bad accounts as well," said Ms. Azarchs.
This new vanguard of credit card marketers has beaten the risk, the report said, thanks to advances in credit scoring technology, which helps screen the population for the most credit-worthy consumers.
Issuers that encouraged balance transfers got the additional benefit of earlier profits.
Waiving or eliminating the annual fee and risk-based pricing, which allows consumers with superior credit histories to pay lower interest rates, contributed to these issuers' success.
The growth of new and newly aggressive issuers resulted in reduced market shares for traditional issuers like Citicorp, Chase Manhattan Corp., BankAmerica Corp., and Wells Fargo & Co.
The leaders suffered from the recessions in the Northeast and on the West Coast and were slower to adopt the new marketing strategies.
According to Standard & Poor's, receivables growth in the industry slowed from 18% in 1989 to 7% in 1992.
Citicorp was the first of the traditional leaders to begin recouping balances when it issued a cobranded card this year with Ford Motor Co.
Chase Manhattan and Wells Fargo Bank recently launched new marketing campaigns. BankAmerica, which had the greatest runoff, has not followed a diversified card strategy, partly because it is in the midst of integrating its operation with the former Security Pacific Corp., Ms. Azarchs said.
With the market for new accounts reaching the saturation point, Ms. Azarchs maintains that the industry is growing in another way: Transaction volume is increasing rapidly and new types of merchants continue to be added, particularly supermarkets and medical care establishments.