US credit card mail offers decline in Q1 2008, lowest level since 2003


28 May 2008

NEW YORK — Credit card mail volume declined significantly in 1st quarter 2008 as issuers continued to cut back offers due to ongoing concerns about the economy. Quarterly mail volume was the lowest seen since 4th quarter 2003 according to Mail Monitor, the direct mail tracking service from global market research firm Synovate.

During Q1 2008, 1,131.6 million offers were received by US households, down 18% from the 1,372.3 million offers received during Q1 2007. Response rates were virtually flat at 0.4%.

"Issuers that target subprime customers and those exposed by the mortgage meltdown continue to drive the decline," said Andrew Davidson, Vice President of Competitive Tracking Services for Synovate's Financial Services Group. "However, most major card issuers have scaled back their offers to lower income households, resulting in a significant drop in overall mail volume," he added.

Card issuers that cut back solicitations the most were HSBC (-54%), Washington Mutual (-39%) and Citigroup (-36%). HSBC and Washington Mutual, in particular, target subprime customers while Citibank has experienced financial difficulties as a result of the mortgage crisis.

However, there may be some indication that the worst is over for the card industry. Washington Mutual, Citigroup and Discover, while down compared to Q1 2007, have increased volume compared to Q4 of last year. "These three issuers hit five year lows in the 4th quarter of 2007 so their increased volumes in 2008 suggest a more confident outlook for the rest of the year, which could have a ripple effect on the mailbox," said Davidson.

Furthermore, the reductions to the Prime Rate are finally having a positive impact on the credit card terms being offered to consumers. The mean single/go-to APR declined from 12.90% in Q1 2007 to 12.20% in Q1 2008. As a result, fixed rate offers have increased proportionately, from 22% to 40% of all mail, as issuers compete by trying to lock in consumers at the new lower rates while still anticipating further cuts to Prime (which subsequently occurred during Q2). At the same time, the proportion of offers promoting introductory rates, either for purchases or balance transfers, is up from a year ago as issuers try to stimulate card activity.

"Despite the recent cutbacks, the overall outlook for credit card solicitations remains favorable. Direct mail is still the number one method for acquiring new credit card customers, and issuers continue to invest in mail to generate a steady flow of applications," said Davidson.



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About Mail Monitor

Synovate Mail Monitor tracks credit card acquisition volumes and response rates throughout the US, and evaluates attitudes, behaviours, terms, and usage for each card in consumers' wallets. It is a service of Synovate's Financial Services Group, which generates consumer insights that drive competitive marketing solutions in the banking, investments, insurance and payments industries.

For more information on Mail Monitor visit www.synovate.com/mailmonitor.



About Synovate

Synovate, the market research arm of Aegis Group plc, generates consumer insights that drive competitive marketing solutions. The network provides clients with cohesive global support and a comprehensive suite of research solutions. Synovate employs over 6,400 staff across 62 countries.

For more information on Synovate visit www.synovate.com.