Quit Complaining About More Credit-Card Offers

Increase in Mailers Means Issuers Are Willing to Lend Again -- but Are Consumers Ready to Start Borrowing?

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YORK, Pa. (AdAge.com) -- Here's one sign the recessionary clouds are parting: Credit card offers are up.

For the first time in three years, the number of credit-card direct mailings increased from quarter to quarter, with 575 million mailings sent in the fourth quarter of 2009, up 47% from the previous quarter, according to tracking firm Mintel Comperemedia. At the same time, measured media spending for credit cards was up to $342 million for October and November 2009, a 54% jump over the $254 million spent during the same two months of 2008, according to Kantar Media's most recent figures.

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"Credit-card acquisition mail is very influenced by the economy," said Mintel Senior VP Andrew Davidson. "I think this represents a cautious optimism by issuers. ... For 2010, we'll see a slight increase, and while we may see some fluctuations from quarter to quarter, we'll see it build steadily over the coming year."

"What we're seeing here is the turtle poking his head out of the shell," said Greg McBride, Bankrate.com analyst. "Credit-card issuers have been hunkered down inside their shells weathering the storm of delinquencies and defaults, but at some point you've got to get out and lend or grow receivables. That's the business."

Led by JPMorgan Chase, which increased mailings by 87% over the same quarter in 2008, and U.S. Bank, which logged a 64% increase, almost all of the major card issuers increased mailings, Mr. Davidson said, signaling an overall new willingness to lend. (Chase now accounts for 25% of all credit card offer mailings.) Chase's measured media spending saw a massive jump too, from $17 million in October and November 2008 to more than $84 million in the same two months of 2009, according to Kantar data.

"Chase continues to invest in building the Chase card business, and our suite of Chase products. We will continue to do so in 2010," said a Chase spokeswoman. "We won't comment further on specific details of our spending in any given area."

Bouncing back
The jump in mailings needs to be taken in context. While direct mailings were up at the end of the year, the total for the year -- about 2 billion pieces -- is still way below pre-recession levels from 2004-2007, when some 5 billion to 7 billion direct mail offers were sent every year.

Mr. Davidson said he doubts mailings will ever reach those heights again, but he also believes the lowest trough is past, having occurred in the second and third quarters last year. Overall marketing and advertising spending data seems to support the increase.

Toon van Beeck, analyst at IBISWorld, indicates that the spending rise will benefit direct mailers but also other media. He said that credit-card issuers generally spend about 7.6% of their revenue on advertising, and while direct mail gets a big part of that, "we are also seeing a slow shift away to more TV and online."

But while it might be a boon for the media, the new wave of credit-card offers isn't necessarily a boon for consumers. Stricter government regulations in the Credit Cardholders' Bill of Rights regarding fees and rate increases take effect Feb. 22, and banks are raising rates and tightening credit lines to compensate. The average APR, for instance, was 13.95% in fourth quarter credit card offers, up from 11.8% a year before, according to Mintel's data. And about one in three of the 2009 offers imposed an annual fee, compared to just one in five in 2008.

"The offers are less attractive than what we've become accustomed to, but that's the new normal," Mr. McBride said.

Still, card issuers looking to lend is only half the equation -- are consumers looking to borrow again? Mary Beth Sullivan, managing partner, Capital Performance Group, said conditions seem right for more marketing and more card mailings getting opened. Consumers who came out of the past year disenchanted with their card issuer are open to a change, and credit-card companies are re-evaluating portfolios and offering new products.

"You'll see marketing spending up] this year, certainly relative to last year," she said. "And [because] the product is unlikely to be as profitable as before, that may drive a reduction in spending." Still, she added: "Never underestimate the creative power of these companies to create products consumers want."

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