Invitation to Apply: Staying in the Credit Card Game
Lately I’ve noticed a change in the direct mail I receive from credit card companies. In the past they have arrived in my mailbox in a business size plain white envelope that included the credit card company’s logo and a short phrase touting the highlights of the offer (usually 0% interest for balance transfers or a low, low introductory interest rate). The information inside, if I even opened it, included a generic form letter with more detailed information regarding the card. These letters typically used a lot of words and disclaimers in bank speak. Those offers were never a compelling way to catch my attention or incite me to apply.
What is catching my attention lately? The dramatic black, high quality paper with “my personal invitation” enclosed and glossy booklets with photographs of exotic places and smiling couples. The mailings still include the lengthy language necessary to explain the cards’ terms and conditions but they also ensure the benefits of the card are sold in a more compelling way through pictures and descriptions with less financial language. The presentation is much better, but most of them also come with a hefty annual fee.
It may be that at this stage in my life my financial history has bumped me into the next tier of credit card offers or that card companies are becoming more sophisticated with their product marketing. Regardless, the flashy marketing has sparked my interest in what is driving the change and why I’m taking note of it.
Credit card companies are definitely competing for the wealthiest, highest-spending customers (not that I consider myself in this category). That is the target market everyone would like to attract. With many cards dropping or reducing their rewards programs, there is a market to pursue. Consumer demographics are not static, especially in a post-recession world. Many customers who were once considered prime experienced job losses that impacted their ability to make payments on time. These were temporary hardships and many of those same consumers are now employed and rebuilding their damaged credit. Within these changing demographics there is room for credit issuers to expand their marketing reach and tap into a valuable new customer base.
Another big industry shift is in private label credit cards. Several years ago this market was declared dead but it is now coming back into focus. CEB TowerGroup published a report last month regarding the renewed interest in private label cards (What’s Old Is New Again: Private Label Cards). Plus a quick search on American Banker for private label credit cards shows no shortage of recent stories about the latest partnerships between banks and retailers or the purchases of existing private label portfolios.
Clearly the credit card industry is undergoing many changes due to the rash of new regulations and recession-related challenges that have tightened the credit market. This year my favorite rewards card cut all of the benefits I used and valued the most. No new perks were added, but my annual fee remained the same. That doesn’t compute for me. Credit card issuers should take note of what their competitors are doing and make sure they are staying in the game. It might be time to consider some of these new offers gracing my mailbox.