Credit-Card Marketing Message: We'll Help You Pay Off Your Debt

Visa, AmEx, MasterCard Promote Rewards, Debit to Frugal Cardmembers

By Published on .

YORK, Pa. (AdAge.com) -- Credit's out, debit's in -- just ask Visa, MasterCard and American Express.

As housing prices fall and job losses mount, consumers are increasingly keeping their plastic tucked tight in their wallets. U.S. consumers trimmed credit-card debt $6 billion from November to December last year, the only monthly decrease for the past two years. Although credit-card debt is still high, at $5,710, up 6% year over year according to TransUnion, studies show consumers are struggling to pay down what they already owe.

In many cases they are failing. Credit-card delinquency, defined as more than 30 days past due, grew to 5.9% in January, the highest since a previous peak of 6.3% in January 1992, according to Moody's. Credit-card charge-offs, or uncollectable debts, are also up to more than 7.5%, and many analysts believe the tally could crest above 10%.

"A lot of people are feeling powerless with all the challenges they're facing, and one way to take control is by using a debit card," said MasterCard VP-U.S. Advertising Chris Jogis.

So what's a battered financial-services sector built on the concept of buy-now-pay later to do? Promote fiscal responsibility and paying as you go.

Per-transaction income
In fact, although it might not at first seem so, Visa and MasterCard are relatively well-positioned to ride out the recession. That's because those companies make money on the transaction every time a consumer uses a card, but they don't hold the debt, which is the responsibility of banks such as Citi, Chase and Capital One, who issue the cards.

That's why Visa launched a new global tagline "More people go with Visa" and ad campaign from TBWA Worldwide, last week, with the goal of persuading consumers to use electronic-card payments instead of cash or checks. "It's not about getting people to spend more, but just that as you're out there living your life and when a transactional moment happens, we propose that it's a better transaction with Visa," said Kevin Burke, head of global consumer marketing.

MasterCard has also been focusing on debit cards for the past few years and recently added MasterCard Savings for debit-card holders, with incentives of 5% to 20% average discounts and/or free shipping from a variety of merchant partners. Mr. Jogis said the company's "Priceless" campaign from creative agency McCann Erickson, New York, has toned down its messaging to focus on value, and in creative executions talk about "helping consumers outsmart the times."

So far both Visa and MasterCard have continued to post healthy quarterly results, with Visa most recently marking a 28% in quarterly net income and MasterCard noting a revenue increase of 29%. However, both companies made identical cautionary statements that growth will likely slow this year, possibly only in the high single digits, and promised cost cuts to keep the bottom line healthy.

Paying for necessities
American Express, which is both a payments network and a credit card, is shoring up its health by focusing more on its charge cards -- the green, gold and platinum cards -- that consumers pay off each month. It is also beefing up rewards to customers by promoting its card for paying for necessities. "It's a way to let people cash in rewards for more everyday things now that there is a pullback on discretionary spending," said a spokeswoman for AmEx, whose account is held by Ogilvy & Mather, New York.

The marketer will have to work quickly -- AmEx has seen revenue drop 11% and profits plunge 49% in the fourth quarter as it deals with growing loan delinquencies and write-offs.

Discover Financial Services, which also has a payment network and credit card, recently launched an online "spend analyzer" promoted by a TV and online and print ad campaign, that includes a pay-down planner and purchase-planner tools. And although the analyzer product was in the works before the fall financial debacle, Larisa Drake, VP-brand communications, said those messages are now more relevant and important than ever. It also launched a debit card for teens called the Current Card.

Discover reported fourth-quarter income growth of 10% year over year, but was aided by proceeds from an antitrust settlement win. The company noted card sales declined 2% for the quarter vs. last year, and forecasted a worsening charge-off rate that could climb more than 6% in 2009.

Both the debit card and rewards strategy play to consumer trends. According to a recent study from Hitachi Consulting and BAI Research, debit cards now account for 37% of in-store payments (up from 21% in 1999), while cash has dropped to 29% (from 39%) and checks are down to 8% (from 18%). Credit card use has remained steady at 22%.

Rewards working On the rewards side, more than 51% of respondents to the study said rewards have a "strong impact" on card usage, with three-quarters of those surveyed reported carrying at least one card with rewards attached.

The pay-as-you-go shift isn't short term, either -- many believe it is a change in consumer behavior that credit-card companies and banks will have to acknowledge for the long run. Debit cards and prepaid cards will become even more popular as ideas such as paying down debt and living without excess take hold.

"Consumption is always, at some level, aspirational, and during the bull market, credit-card companies were very good at appealing to that sense of wanting to belong to something exclusive, luxurious or seemingly unique," said Kevin DePew, executive editor of financial website Minyanville. "But for the next decade we will be a experiencing a structural shift in what, exactly, people are aspiring toward."

In this article:
Most Popular