Card companies are on the rebound, cluttering mailboxes, working hard to distinguish themselves from the next best thing, while customers vow to resist temptation and promise never to make the same mistake twice.
The number of credit card offers to consumers has tripled from a year ago. Some consumers are getting four or five card offers a day!
So how do customers feel about this?
Some customers are excited. Their optimistic views are under the influence that if Visa has decided to send them a brand-new card after the credit crisis that brought so much lender paranoia, it must mean that they have stellar credit.
On the other side of extreme, some people are bitter. In an interview with a disgruntled MasterCard customer who wished to remain unknown, I discovered that he and his wife lost their jobs and they were facing credit card debt. Later, he was rushed to the emergency room for an ulcer, and she had bypass surgery. The couple began to struggle with growing medical bills and could barely pay their phone bill. When the phone was actually connected, the couple could always count on the card company to call in with a an offer for which they new they would not qualify.
But my survey show that majority of people are open on new offers and seek certain things as cash back bonuses, rewards, and frequent flyer miles. Additionally, many customers are not sure about their situation, with majority not even able to tell their current credit score. They are lured by new credit card offers because of a general perception that having a credit card helps rebuilding credit history.
So is the economy really inspiring more optimism and desire to build up credit, or are credit card companies just looking for new tactics to bolster their business? Typically, companies start issuing new cards when the economy improves. It does seem like the economy is turning around. Household debt repayments have been on the rise quickly — if the trend continues, we will be at a debt-to-income ratio higher than the early 90s. Credit card and mortgage delinquency rates are falling.
Credit card companies do not want history to repeat itself, either. Hit hard during the recession, they are proceeding with caution. Card issues are coming up with new devices to evaluate customers. They are not just looking at credit scores. Instead, card companies are typecasting customers so they can adequately identify their client needs.
According to The New York Times, credit cards consumer can now be categorized as follows:
• Strategic defaulters: Customers who made bad real estate decisions, but their income is stable. They are the type to walk away from sticky situations like an underwater mortgage.
• First-time defaulters: Customers who paid steadily until a major disruption, like a job loss.
• Sloppy payers: Cardholders who pay sporadically.
• Distressed borrowers: The terminally cash-strapped.
• Abusers: Consumers who are defiant about paying their bills.
On a marketing front, credit card companies are seeking new strategies to avoid the “me-too” approach. Competition is intense. As new trends emerge, Credit Card companies are doing whatever it takes to win customers. For example, they are making hard-to-resist offers like zero balance transfer for 24 month, below-average APRs for purchases, and longer teaser rate periods.