The fallout from the Credit Card Accountability, Responsibility and Disclosure Act of 2009, most of which went into effect in February, has not produced the expected negative results in terms of less-appealing credit card offers issuers are mailing to consumers, according to Mintel Comperemedia, which tracks card-offer mailings.
In fact, consumers are getting benefits both from the legislation, which set out to protect consumers, and from the credit card offers, which have provided more-favorable terms as issuers compete for their business, Andrew Davidson, Mintel senior vice president, tells PaymentsSource.
Issuers mailed 1.1 billion credit card offers to consumers during the second quarter of this year, up 163% from 419 million offers during the same period a year ago, Mintel reports.
Market analysts had anticipated a return of annual fees, the disappearance of teaser rates and a watering down of rewards programs to help cover lost revenue from the CARD Act. One way issuers might lose money is that they now are required to apply cardholder payments, above the minimum due, first to the balances with the highest annual percentage interest rates. “As the dust settles, we have evidence that this [negative impact] is not happening,” says Davidson.
Only 28% of card offers during the quarter included an annual fee, down from 33% that did a year earlier, according to Mintel.
In addition, the majority of offers continue to promote teaser rates for balance transfers or purchases. During the quarter, 56% of mail offers promoted an introductory annual percentage rate for both balance transfers and purchases, up from 37% that did a year earlier.
Most balance-transfer offers are promoting a 0% teaser rate, and some issuers are extending the length of the introductory period to 14 months or longer, Davidson says. However, consumers will get what they pay for, as the longer the introductory period the higher the percentage rate issuers are charging after the period expires. Such rates are approaching between 4% and 5% of the balance, whereas the industry average is about 3%, Davidson says
Rewards-program offers continue to be the norm for the industry, according to Mintel, as they were included in about 80% of mailed offers during the quarter. Cash-back offers also are growing, as are offers for more rewards miles per dollar spent on some cards, Davidson notes. Mintel says there is no evidence to indicate that the number of rewards required to redeem has increased. “In fact, many cards these days are improving their rewards programs: Chase is promoting 5% cash back in various categories, while Capital One is promoting "double miles" without diluting redemption rates,” says Davidson.
Although some issuers initially increased annual percentage interest rates in response to the CARD Act, those rates are starting to come down, Mintel’s data show. During the quarter, the mean rate for variable-rate offers declined to 13.79% from 14.21% the previous quarter, marking the first quarterly decline since last year’s first quarter. The variable mean rate for Q2 2009 was 12.06%.
The rates may be dropping as issuers compete for cardholders, Davidson notes.
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