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Worry creases a homeowner's brow as delivery men unload a washing machine and other major appliances in the driveway. "Can I really afford all this?" the homeowner seems to wonder.
The image appears midway through a new television ad promoting Discover Financial Services' "Brighter" campaign, which encourages consumers to "spend smarter" and carry less debt by using the card brand's Paydown Planner tool and Motiva card.
"Maybe then we could have a better quality of life and be in a better financial position while we are living it," the ad's narrator says.
The campaign addresses widespread concern about the economy and signals a shift in cardholder-issuer relations, with revolving credit taking a back seat to paid-in-full economics, observers say.
Discover cardholders can log onto the company's Web site and use the Paydown Planner to calculate exactly how much they need to pay each month to clear their balance by a certain date. The Paydown Planner bases figures on the terms and conditions specific to the cardholder's individual account. It even considers whether interest rates vary on the balance for different types of purchases or balance transfers.
Also tied to the "Brighter" campaign is Discover's Motiva card, which pays cardholders a month's worth of interest for every six consecutive payments made on time. The bonus comes in addition to the other "cash-back" rewards the cardholder receives for using the card.
Despite their apparent timeliness, Discover did not develop the Paydown Planner and Motiva card in response to the current state of the economy but designed them instead to help cardholders become better financial planners, says Larissa Drake, Discover vice president of brand communications. "It's been our mission all along to help consumers spend smarter," she adds.
However, some observers say the Paydown Planner and Motiva card indicate the direction issuers should take to remain competitive.
Both represent "the inverse" of the industry's typical practices, says Brian Riley, research director for the bankcard practice at the Needham, Mass.-based TowerGroup, a research company owned by MasterCard Worldwide. Also, such "populist messages" might become less frequent if the economy fails to turn around soon, he says.
Marketing efforts in general may be slowing as the industry tries to cope with bad debt and scrutinize its acquisition practices, Riley says.
A card applicant with a few thousand dollars in credit card debt, a sizable mortgage and car payments now sends up red flags. "I have to be worried–is this guy out of work?" Riley asks. "Does he have to go shopping at Bloomingdale's just to feel better? "The whole model has changed."
The economy also is driving the change in attitude. Credit card companies face new challenges in developing messages and marketing strategies that appeal to consumer demographics that are being redefined.
Credit-risk models are changing, and a FICO score of 720 does not generate the same sense of security that it did a year ago, Riley says. The economy also has exposed vulnerabilities in the so-called "mass-affluent" sector, or those consumers with household equity and assets totaling between $100,000 and $1 million.
"It's important that issuers do maintain a little bit more of a conservative posture until things settle down," Riley says. "Right now, there are so many ways the economy can go."
Instability in the marketplace can make it difficult for issuers to gauge the impact of the promises they make to the public.
A year ago, Citigroup garnered positive headlines for its "A Deal Is A Deal" initiative. Citi says it would stop reserving the right to raise interest rates on cards at any time but would retain the right to change them upon renewal. The issuer also says it would discontinue the practice of raising rates when cardholders are late paying a bill unrelated to their Citigroup account, which is known as "universal default."
However, the New York Times, in an article citing unnamed Citi executives, says the company is now considering stepping away from the promise. Citi was unable to take advantage of the changes and missed out on revenue it would have received from raising rates, according to the report. Citi declined to comment for this story.
Riley says the issuer's change in market value in the last year warrants the change in position. "Citigroup has a lot of things to look at within its own process," Riley says. "I don't think [the promise] was meant to be deceptive."
Nevertheless, credit card companies want to position themselves as responsible lenders while proceeding with caution as they respond to delinquent accounts.
Some debtors may be conscientious cardholders who are going through a rough period, and turning off those consumers may hurt the issuer in the long run.
"As Americans we view the economy as a temporary issue, and, sooner or later, we will be back," Riley says. "So you don't want to scare away all your customers."
