Credit Card Sector Boosts Use of Direct Mail
Despite tighter marketing rules, direct mail use is on the upswing in the credit card sector.
“In the first quarter of 2011, 890.3 million card offers were sent out, nearly double the 481.3 million sent out the same time last year,” says Anuj Shahani, director of competitive tracking services at Synovate. “Last year, we were quite in the midst of the recession and the whole financial recovery had barely started.”
Not surpsingly, the Credit Card Accountability Responsibility and Disclosure (CARD) Act of 2009, which took effect in Feb. 2010, slowed the flow of direct mail use for the sector. https://chiefmarketer.com/disciplines/directmarketing/0401-credit-card-mail-rebound/index.html.
Under that law, credit card companies were no longer allowed to:
· Raise interest rates on existing balances.
· Raise rates if card holders fail to make timely payment to other creditors.
· Issue cards to minors without adult co-signers, unless they show means to repay the debts.
· Fail to disclose how long it would take to pay off balances at the monthly minimum rate.
“Issuers are mailing again, but doing so strategically by testing different risk thresholds and supplemental data to enable them to work within new regulations as well as manage an evolving consumer risk landscape,” says Michele Pearson, vice president, prospecting and acquisitions, Experian.
The CARD Act has contributed in part to changing the credit card offer landscape.
“Rewards are quite the norm now, with 80% of the mailings carrying some kind of reward like points, miles or cash back,” Pearson says. “The biggest growth we’ve seen is in cash back. That has reached almost 50% of all offers.”
One type of offer that has gone into decline is that of low interest rates, says Shahani, noting that many card issuers raised their interest rates so that now the mean rate was about 13.75% in the latest quarter.
Although this interest rate is lower than last year’s peak of 14.11%, Shahani warns this decrease, however slight, is not likely to last too long.
“The other thing we have to keep in mind is that, compared to historical levels, the prime rate is at its lowest ever,” Shahani warns. “So we know that in six or eight months the prime rate might go up and with the APRs (annual percentage rates) already at 13% the APRs might be at 15% next year.”
Other types of financial institutions are also utilizing direct mail. Columbus, OH-based Huntington Bank, for example, is using mail to promote its checking account programs to prospects within a short radius of its 600 bank branches in Ohio, Indiana, Michigan, Pennsylvania, Indiana, West Virginia, and Kentucky.
In the past, Huntington has used direct mail to reach small business customers. https://chiefmarketer.com/disciplines/directmarketing/0401-bank-mailing-promotes-product/index.html.
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