U.S. credit card offers pick up for select few
U.S. credit card companies are targeting affluent consumers in a resurgence of marketing campaigns, as they recover from massive defaults by subprime borrowers in the past year.
“We have seen almost the entire mailbox skew toward prime and superprime consumers,” said Andrew Davidson, senior vice president of research company Mintel Comperemedia.
Credit card promotional mail volume rose 34 percent in October from September, to 180 million pieces, the highest level since December 2008, according to a recent study by Mintel Comperemedia.
That was the largest month-to-month increase in credit card mail volume since 2004, when the industry was starting to recover from the 2001 recession.
A recent drop in credit card defaults from record highs may have made banks more comfortable with recruiting new clients, analysts said.
“We are seeing more spending in marketing initiatives now that signs of credit deterioration have eased somewhat,” said Brad Ball, an analyst at Ladenburg Thalmann. “You’ve got more credit stability, less need for significant increases in loan loss provisions, and therefore more capital available to invest in new account acquisitions.”
However, mail volume is still down 74 percent year-to-date, and is expected to end 2009 at the lowest level in at least 10 years, Credit Suisse analyst said in a recent note to clients.
The offers are not available to everyone. Unlike recent years when credit card offers were mailed to households of all income levels, lenders now target only affluent customers who are considered less risky.
“Chase and American Express are the two that really increased their activity,” Davidson said.
JPMorgan Chase & Co ranked first in credit card mail offers in October — more than doubling its volume from September — as the largest U.S. issuer of Visa-branded credit cards promoted its new Sapphire card to the top 15 percent of households by income.
American Express Co ranked second, as the largest credit card company by purchase volume increased credit card and charge card promotions, aggressively competing with Chase for wealthy customers.
Together, JPMorgan and American Express issued two out of five credit card offers by mail. Both have also been advertising aggressively on television and in newspapers.
Chase’s TV commercials show a young woman who spent all the reward points on a dress, while her husband was thinking of using them for a vacation. American Express is promoting its cards with dozens of original happy faces created with bags, umbrellas, or sofas.
American Express spent $150 million more in marketing and advertising in the third quarter than the second quarter, and has said it expects to keep investing in marketing as loan losses decline.
But even some smaller rivals have started offering more credit cards. HSBC, hurt by its exposure to subprime borrowers, increased mail offers by almost 50 percent in October from September, while U.S. Bancorp doubled its promotions.
Filed under: business by Fred