Credit card issuers once are again filling consumers’ mailboxes with credit card offers after a tough year in 2009, though not nearly as much as before the economic downturn, reports Synovate Mail Monitor, a New York-based firm that tracks direct mail.
During the fourth quarter of 2009, U.S. households received 398.5 million credit card offers, up 46.2% from 272.5 million the previous quarter. However, mailings were down 40.4% from the 668.1 million offers during the fourth quarter of 2008.
Mintel Comperemedia noted a similar trend earlier this month, saying issuers mailed 575 million credit card solicitations during the fourth quarter, up 47.1% from 391 million the previous quarter though down 35.5% from 891 million mailings during the fourth quarter of 2008 (see story). http://www.paymentssource.com/news/upswing-credit-card-mailings-mintel-3000541-1.html
With the Credit Card Accountability, Responsibility and Disclosure Act going into full enactment later this month, issuers’ direct mail is making comeback. “Issuers are now coming back once they were able to figure out a new business model that works with the CARD Act,” Anuj Shahani, director of competitive tracking services for Synovate’s Financial Services Group, tells PaymentsSource. “But unfortunately for consumers, that means higher annual fees and annual percentage rates.”
One of the key factors in issuers’ response to the CARD Act is higher annual percentage rates, Shahani says. The average rate during the fourth quarter was 13.51%, and what used to be a decent blend of variable and fixed rates is now entirely variable rates, he says. The average rate during the third quarter of 2009 was 12.49%, while the average rate during the fourth quarter of 2008 was 11.47%.
As the prime rate goes up in response to the economy, so will the annual rates, Shahani says. “We expect to see APRs go much higher–in the mid-teens in 2010 and up to 20% or higher in 2011,” he says.
Synovate also expects consumers to respond to higher fees. A recent Synovate consumer-confidence study found that three of every four credit cardholders either will cancel or consolidate the credit cards in their wallet if they carry an annual fee.
As such, issuers should come up with innovative methods to keep consumers if they raise their fees, Shahani says.
“In all the work we do in the payments sector, we know that issuers are aware that many cardholders are unwilling to pay hundreds of dollars in annual fees,” he says. “Issuers will need to come up with solutions such as introducing low-fee cards and creating hybrid cards to tackle the problems raised by the new legislation and remain profitable. With innovation on the forefront, credit card issuers are poised for a comeback.”
