Household International Inc. is the latest major credit card issuer to scale back its commitment to the business.
The nation's largest consumer finance company will no longer send out solicitations to the mass market. Instead it will focus on subprime customers to whom it already sells mortgages, auto loans, and other products.
But despite the pullback, first reported last week in The Wall Street Journal, Household's card unit will keep the bulk of its portfolio, in the form of the General Motors MasterCard and AFL-CIO Union Privilege programs.
Household, of Prospect Heights, Ill., will also maintain its successful operation in the United Kingdom, where it issues the Goldfish card, a cobranding venture with a utility.
In the United States, Household is the ninth-largest bank card issuer, but its $15 billion portfolio is a third the size of those of the market leaders-Citigroup, Bank One Corp., and MBNA Corp.
"It's clear to us that the credit card industry in the U.S. has declining profit margins," said Craig Stream, spokesman for Household International.
"We have a customer base of millions of people who are not getting an adequate credit focus, so we have a tremendous opportunity to offer them credit cards in a way we've never done before," he said.
The Household card unit, in Salinas, Calif., recently signed an agreement with Renaissance Bankcard Services, a subprime credit card portfolio management company. The deal allows Renaissance to solicit the three million consumer borrowers Household added through its merger with Beneficial Corp. last June.
Renaissance, of Portland, Ore., will initially market and service credit cards to lower-income customers at Household's 1,400 U.S. branches. The two companies are discussing ways to approach additional customers.
Irving J. Levin, chief executive officer of Renaissance, predicted that the subprime card market would consolidate along the same lines as the mass market.
"There will end up being a few major players, and I'm betting Household will be one of them."
Other companies that have recently retreated from credit cards are Mellon Bank Corp., PNC Bank Corp., and Chevy Chase Bank.
Last year, Household sold about $2 billion of its $5 billion generic card portfolio.
A portion went to Fleet Financial Group. The head of Fleet's card division, Joseph W. Saunders, held the same position at Household. He is a proponent of the national mass market.
His successor, Bobby Mehta, was hired from Boston Consulting Group, which counted Household among its clients. Mr. Mehta's review of Household's strategy led to the new subprime emphasis.
Mark C. Alpert, analyst at BT Alex. Brown Inc. in New York, said Household's move makes "a tremendous amount of sense." "There is a window of opportunity in the subprime segment that may last two to three years," he said.
Mass mailers like Providian Financial Corp. and Capital One Financial Corp. got to the subprime customers first, but industry experts place the market's overall penetration rate at only 25%.
Mr. Alpert said saturation in the prime market will lead other issuers toward prospects with lower incomes or less-than-stellar credit histories.