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Credit card mail volume drops in 2002 due to flat economy and worries about impending war

2 June 2003

Issuers Less Inclined to Solicit Low-Income Households in Uncertain Market, Mail Monitor® Tracking Service Reports

TARRYTOWN, NEW YORK — CREDIT card mail volume declined to 4.89 billion offers for 2002, a drop from a record high 5.01 billion solicitations reported the previous year, halting the year-over-year growth in mail offers seen since 1999.  Consumer response rates remained at the low rate of 0.5%, according to Mail Monitor®, the direct mail acquisition tracking service from Synovate's Financial Services Practice.

"The dip in credit card mail volume really hit in the 4th quarter, propelled by an uncertain economy and worries about impending war," said Andrew Davidson, Vice President of Competitive Tracking Services for Synovate. "In such a volatile environment, U.S. card issuers were less likely to target low-income households."  Just 20% of offers during the fourth quarter were received by households with annual incomes of less than $35,000, compared to 32% of offers targeting those same types of household during the fourth quarter of 2001.

Low Prime Lending Rate Stimulates Attractive Deals, But Response Rates Remain Flat

Despite the fourth quarter dip in volume, most U.S. households still found their mailboxes full of solicitations " 73% of U.S. households received an average of five offers per month.

"For those who did get offers, the government's low prime lending rate created some excellent deals, including very low Annual Percentage Rates (APRs) and 0% introductory offers on balance transfers and purchases," said  Davidson.  "The average APR dropped to 11.48% during the fourth quarter of 2002 compared to 13.77% the same time a year ago, and over half of all offers were promoting APR's that were actually lower than 11%."

Davidson also pointed out that not only were APRs lower during the fourth quarter, but more offers featured 0% introductory rates. "Fifty-nine percent of all offers promoted a 0% introductory rate for balance transfers in the fourth quarter, up from 45% in the same period of 2001; and 45% of all offers featured a 0% introductory rate for purchases, which was up from 31% during the same time the year before."

Davidson also noted that traditionally issuers tended to promote 0% introductory rates for balance transfers or purchases in their offers.   More recently, the trend has been toward card offers that promote a 0% introductory rate for both balance transfers and purchases in the same offer.

"During 2002's fourth quarter, 33% of all offers promoted this combination package, versus 16% the year before," said Davidson.

Despite these incentives, response rates to credit card offers remained virtually flat at 0.5% for 2002 versus 0.6% for 2001.

"This is a very cluttered direct mail environment and response rates have been below 1.0% since 2000. For issuers, the cost of acquiring new cardholders has increased significantly. Yet direct mail solicitations still produce  millions of card applications each year," concluded Davidson. According to Mail Monitor® estimates,  28 million card applications were generated by direct mail offers during 2002.

Download Mail Monitor chart (PDF 60Kb)