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U.S. Credit card companies mailing consumers more offers

2 June 2004

Synovate's Mail Monitor reports volume up 21% since last quarter

CHICAGO, ILLINOIS — DURING the first quarter in 2004, US households received an estimated 1,284.7 million direct mail credit card offers according to Mail Monitor®, the direct mail tracking service from Synovate.

Compared with the previous quarter, credit card mail volume was up by 21%. Volume was up by 8% when looking at the same time one year ago. (Chart A)

The increased mail activity during the quarter resulted in an average of 73% of US households receiving 5.3 offers per month. Response rates for those offers were at .4% whereas, at this time last year, response rates were at .9% reflecting the increase in volumes.

Some of the dramatic growth resulted from several issuers returning to the use of direct mail. During 2003, these issuers were hit by record personal bankruptcies and continued unemployment and, as a result, cut back on their mail volume to focus on the credit quality of their portfolios.

"The modestly improving economic outlook for 2004 combined with continued low interest rates has prompted issuers to increase their mail activity," said Andrew Davidson, Vice President of Competitive Tracking Services for Synovate's Financial Services Practice. "We have seen card mail volume steadily increasing on a monthly basis since the 3rd quarter last year. In fact, March 2004 mail volume was at 473 million which is the highest monthly volume we have seen since November 2001."

At the same time, the prospect of interest rates increasing at some point in the future may also be a motivating factor as credit card issuers look to make the most of the current economic environment.

"Consumers are used to seeing some fantastic deals," said Davidson, "if prime increases there will still be competitive pressure to keep APR's low however this will become increasingly difficult as profits are squeezed."

The median APR for offers during the first quarter 2004 was 8.99% compared to 9.99% one year ago. But, during the quarter some issuers were offering rates as low as 3.99%

Last year at this time, only 2% of offers promoted APR's of 6.99% or below. That figure has jumped to 18% of all offers during the first quarter of 2004. With APR's at such low levels, issuers are mailing fewer offers with introductory rates for either purchases or balance transfers.

"The majority of offers do promote some type of introductory rate," said Davidson, "however, because of the increase in lower on-going rates, this became less frequent. In 2003, we saw 80% of all offers focused on an introductory rate, but only 69% of offers used that same tactic during the first quarter of 2004. When on-going rates are so appealing, issuers don't need to offer a low intro rate to attract consumers."

Reward Mail Volume
Reward mail volume continues to increase with reward or rebate offers now accounting for around half of all offers mailed (Chart B). "We continue to see significant growth in offers promoting rewards and cash rebates as issuers seek new ways to stand out from the clutter and acquire new customers that are less likely to switch," said Davidson.

The cash rebate segment has become particularly competitive with dramatic growth to 376.5 million offers during the first quarter 2004 up from 214.8 million offers during the same time period one year ago.

Many issuers now offer cash rebate cards and, as the competition has increased, promotional deals have risen as high as 10% cash back on some cards for purchases at select establishments.