Thanks to an improving economy and a more positive spending outlook among consumers, credit card issuers have started to pump up their mailings once again, and offerings to the subprime market are helping drive the boost.
Issuers sent 481.3 million solicitations by mail during the first quarter ended March 31, up 29.2% from 372.4 million during the same period last year, according to data from New York-based marketing research firm Synovate Mail Monitor.
Anuj Shahani, Synovate director of competitive tracking services, expects mail volume to continue growing. “Overall, we’ve been predicting that with the improvements in the economy, mail volume will continue to increase,” he tells PaymentsSource, noting some issuers have even doubled the amount of mailings quarter over quarter.
JPMorgan Chase & Co. was the top credit card mailer, sending out 140.3 million mailings, up a whopping 226% from 43.1 million a year earlier. Capital One Financial Corp. was a distant second, mailing 88.5 million card offers, up 33.1% from 66.5 million, Shahani says, noting that Cap One had announced plans to re-enter the subprime market and seems to be delivering on that promise with its increase in mailings.
Another surprise was from HSBC Financial Corp., which while briefly considering exiting the U.S. card market, increased its mailings during the quarter to 27.2 million, up 289% from 7 million a year earlier and also focused particularly on its subprime card offerings. HSBC owns the Household and Orchard subprime brands and historically has been a subprime lender, says Shahani. HSBC also maintains a small proportion of prime customers, including premiere cards and the GM card, he notes.
With consumers feeling better about the economy, issuers seem to be putting their faith back into mail acquisition, Synovate says. “This is a massive commitment in terms of expenditure for the issuers, as direct mail is one of the most-expensive channels to acquire new cardholders,” Shahani says. “This tells us that the issuers are not just dipping their toes in the water, they are diving in head first.”
One major unexpected development in mailings involved annual fees. Though Synovate and other tracking firms initially predicted fees to rise because of the revenue squeeze caused by the Credit Card Accountability, Responsibility and Disclosure Act of 2009, annual fees actually dropped to a mean of $68 during the quarter from $92 a year earlier, Shahani says. Issuers such as American Express Co. and Citicorp helped bring down the average with offers of cards that come with annual fees of $30 to $50.
“Another reason that we did not see an increase in the proportion of annual fee mailings is the fact that no issuer may want to be the first one to do so,” Shahani says, noting AmEx and Citi gradually introduced a small fee (less than $50) on select products that did not draw headlines. “But they definitely don’t want all cards to have a fee and draw negative publicity given that their competitors like Bank of America and Chase and Capital One are not doing so. That makes it a little tricky for any one bank to introduce something predatory.”
Issuers have cut back on some of the lavish rewards, such as the Chase Freedom and Citibank Thank You programs, and they increased interest annual percentage rates across the board, says Shahani, who notes that this has allowed them to offset some of the lost revenue from the CARD Act.
