Mailboxes offer dim glimpse into credit card lending

Fewer, less enticing credit card offers now the norm, says Mintel Comperemedia
Chicago (October 30, 2009)–Catch yourself before you cheer for fewer credit card offers in your mailbox. New research from Mintel Comperemedia, a service that provides direct marketing competitive intelligence, shows that you’re not only getting less direct mail for new credit cards, you’re getting less desirable mail for those cards. That’s dismal news for anyone looking to apply for a new credit card in today’s economy.
During the third quarter of 2009, credit card issuers sent 391 million marketing direct mail offers to consumers. Seem like a lot? In the same quarter one year ago, issuers sent 1.3 billion offers. That’s a 71% difference. Estimated quarterly direct mail volume fell just 7% from Q2 2009, however, suggesting that the credit card industry has reached a bottom for marketing direct mail.
Andrew Davidson, SVP of Mintel Comperemedia, comments: “Credit card issuers are cautiously navigating CARD Act regulations. In addition to adjusting their direct marketing strategy by sending less mail, they’re raising rates and fees on existing and new cards. The credit card offers we see today are undeniably less attractive than they were one year or even six months ago.”
Andrew Davidson points to variable purchase APRs, which have risen in credit card mailings despite a steady, low Prime rate. In Q3 2009, 12.53% was the average rate promoted, up more than a full percentage point from 11.43% in Q1 2009.
Additionally, the industry has shifted towards favoring variable APRs over fixed rates, because the CARD Act mandates 45 days notice for any change in terms. In Q3 2009, only 6% of offers disclosed a fixed rate, down from 27% in Q3 2008. This makes it harder for consumers to find a card with an unchanging, predictable rate.
Introductory offers on new cards have also become less enticing. In Q3 2009, nearly 16% of offers disclosed a balance transfer fee of 4% or 5%, rates that were almost unseen in direct mail one year ago. For offers with an introductory purchase APR, the period for use is shrinking. In Q3 2008, half of direct mail offers gave new cardholders 13 months or more to use the introductory APR. In Q3 2009, just 5% did, while one in five (21%) disclosed introductory periods of less than six months.
“The upcoming CARD Act regulations will eat into credit card issuers’ revenue stream, so they’re looking for any legitimate means possible to recoup that income. This has led to whirlwind changes as issuers adapt and test new ways to bring in revenue. The CARD Act’s implementation in February will truly change the structure of the credit card industry for 2010 and beyond,” states Andrew Davidson.