MIAMI BEACH, Fla.–The Credit Card Accountability, Responsibility and Disclosure Act did not deliver the death knell to introductory low-interest credit card offers that many predicted. In fact, many issuers are enriching such teaser offers, a top marketing expert told attendees last week at the 23rd Card Forum and Expo at Miami Beach, Fla.
The full effect of the Credit CARD Act may not yet be apparent, but data from the first quarter of this year reveal certain unexpected trends emerging a year after most of the law went into effect in February 2010, Andrew Davidson, senior vice president at Mintel Comperemedia, a New York-based card marketing research company, told attendees at the annual forum, which PaymentsSource parent SourceMedia Inc. sponsors.
In particular, because the Credit CARD Act restricts issuers’ ability to increase cardholders’ interest rates except in limited circumstances, “a lot of people thought we’d see the end of teaser rates” offering low introductory annual percentage interest rates on new card offers, Davidson said.
Instead, issuers continue to offer generous introductory low interest rates on balance-transfer direct-mail offers, with some enduring for as long as 24 months.
This year through the end of March, 54% of balance-transfer offers carried a low introductory rate enduring for at least 13 months, compared with only 25% that did a year earlier, according to Mintel.
Forty-three percent of direct-mail balance-transfer offers during the quarter were for introductory low interest rates that would endure for seven to 12 months, compared with 61% that did a year earlier. Just 3% of such offers were for introductory interest rates that would endure for up to six months, compared with 13% that were a year earlier.
The Credit CARD Act specifies that introductory interest-rate offers must endure for at least six months. Before the law went into effect, some issuers offered low-interest promotional balance-transfer deals with even shorter durations.
“The final impact of the CARD Act is yet to emerge,” Davidson said, noting the first-quarter data suggest many issuers have overcome any reluctance to extend introductory low-balance offers to customers without the previous safety net that allowed them to raise interest rates if the customer’s profile suddenly grew riskier.
Overall credit card marketing competition is increasing, with direct-mail volumes rising and offers targeting consumers with subprime credit scores on the rise again, Davidson said (
Another emerging marketing opportunity for issuers is online advertising, including banner ads for specific card brands and products that appear on various websites, including card marketers’ own sites.
As evidence mounts that online banner ads during the next year will grow at a faster rate than paid online search-based advertising, “there is an opportunity for (card marketers) to take advantage of that trend,” Davidson said.
During the first quarter of this year Citigroup Inc. dominated in such online advertising impressions, generating 29% awareness, data from Mintel’s consumer-panel research show. American Express Co. was next with 27% awareness, followed by Bank of America Corp. at 14%, Capital One Financial Corp. at 9%, HSBC N.A. at 7%, JPMorgan Chase & Co. at 5%, Discover Financial Services at 4%, Visa Inc. at 3% and other brands making up the remainder.
The holy grail for card marketers will be efforts that combine effective online advertising with targeted direct marketing, Davidson suggested. Best practices include strategies to increase brand awareness online, “and then segue into integrated marketing across direct mail, print and (other) online channels,” he said.
Targeted direct-mail offers targeting consumers more likely to revolve a monthly balance versus those who are more interested in rewards and paying off their balances every month are also on the rise, Davidson said.
Rewards cards with no annual fees comprised 63% of all products during the first quarter of this year, up from 57% a year earlier, while fee-based rewards cards accounted for 15% of mail volume, down from 22% a year earlier.
Plain-vanilla cards offering no rewards and charging no annual fees comprised 15% of all direct-mail offers, up from 9% a year ago, while cards carrying a fee and no rewards declined to 7% from 12%.
As competition intensifies again, issuers must dig deeper into their own market research to determine which specific card offers and features will appeal to niche groups, Davidson said. The key is playing up “cards featuring special benefits and features that are meaningful” to specific groups of customers and combining that with artful integrated advertising and marketing, he said.
Mintel based its direct-mail data on a panel of more than 5,500 U.S. consumers and its online advertising data on an e-mail panel of 1,250 active online U.S. consumers.
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