By Johnson, Andrew
American Banker , Vol. 175, No. 102
Byline: Andrew Johnson
After the financial crisis forced them to retrench, creditcard issuers are again on the hunt for new customers.
Their tactics - low teaser rates that last for a long time and generous rewards offers - include features that many industry watchers expected the big banks would eliminate because of growing cost pressures. But despite some very real concerns about the economy, banks are flooding consumers' mailboxes with credit card offers.
"One thing is for sure, and that is competition is increasing," said Andrew Davidson, a senior vice president with Mintel Comperemedia, a Chicago research firm that tracks direct mailings.
Unemployment remains high, but fewer people are becoming jobless, causing slow declines in delinquencies and chargeoffs and enabling issuers to reduce reserves for loan losses.
As a result, issuers are positioned to grow again and are using competitive pricing to entice prospective customers, Davidson said.
Mintel in May projected that U.S. credit card acquisition mail offers would reach 988 million in the second quarter based on preliminary data. While that figure is down from the 1.53 billion offers sent in the same quarter in 2008, it's up 136% from the offer volume from the year-earlier quarter.
Davidson said the upward trend is likely to continue, with some issuers planning to increase spending on advertising and marketing throughout the year.
But while many of the features included in new card offers are similar to those seen before the recession, the pool of consumers receiving offers is smaller because issuers have raised underwriting standards and are now trying to win higher-quality borrowers.
Mail offer volumes "are coming back, but a lot of them are not finding" their way into "the mailbox of every customer," said John Stilmar, a director who follows card issuers for SunTrust Robinson Humphrey in Atlanta. There has been an "upmarket shift" in "terms of quality," he said.
David Nelms, the chairman and chief executive of Discover Financial Services, told analysts last month that it planned to significantly increase marketing spending in its third quarter because of greater confidence in consumer credit conditions.
"We will be focused both on expanding our wallet share of our existing customers as well as attracting more new customers," Nelms said in a June 24 interview after the Riverwoods, Ill., issuer reported its second-quarter earnings.
A few large issuers are driving the surge in offers.
Of the 988 million second-quarter mail offers Mintel projected, JPMorgan Chase & Co. accounted for 33% of the volume. It accounted for just 8% of the year-earlier quarter's volume.
Chase did not make an employee available for an interview but spokesman Paul Hartwick said via e-mail that it is "focused on several distinct customer segments: affluent, mass-affluent, small-business and partner products."
Chase recently has been marketing a Southwest Airlines Co. co-branded Visa Inc. credit card that lets new customers earn a free flight after making their first purchase - no matter how small the transaction.
Chase has been among the more aggressive players from the standpoint of promotional annual percentage rates and introductory balance-transfer rates, Davidson said. Previous concerns that such perks would disappear and annual fees would become common have been largely unfounded, he said.
For example, 34% of the projected mail offers Chase sent out in the second quarter include an annual fee, up from 54% in the year-earlier quarter, Mintel said. …