Those lucrative card offers — the sign-up cash bonuses and initial bonus air miles — could be reduced in the coming months.
Although usage traffic on Outlaw‘s free credit card deals comparison tool has actually risen over the past two months, some see a rapid slowdown in card marketing efforts, as banks may be less eager to take on new credit customers now.
As FOX Business reported, “Uncertain economic markets should take the blame for a significant drop in the number of direct mail credit card offers, according to analysts at Mintel Comperemedia. The global research company measured just 260 million new credit card offers mailed to American households. That figure represents a drop by 33%, compared to the same period a year earlier.”
The frequency and number of direct mail card offers is an extremely important indicator when trying to figure out how aggressively banks are looking for new business. This is due partially to the adverse selection theory I wrote about recently; banks would rather mail offers to those who are “pre-qualified” than significantly market online to consumers who may not have the creditworthiness for the products they are promoting. In other words, the best people to offer a credit card to are those who don’t actually need the card for financial reasons — or the extra credit. A non-desperate borrower is a good borrower, in the banks’ eyes.
The number of mailed offers is also a good indirect indicator of how sign-up bonuses may change, and become leaner, in the coming months. The rationale here is simple: direct mail and print campaigns comprise a large portion of a credit card company’s customer acquisition budget. If the money spent on those efforts dwindles, the money used toward bonuses and air miles may also dry up.
REMEMBER: The best thing you can do to make yourself attractive to card companies, regardless of how eager they are for new business on the macro level, is to maintain an excellent credit history — and use credit responsibly. The deals out there for those with “average credit” are significantly less lucrative, and usually don’t offer much in the way of a bonus or competitive intro rate, even in the best of times.
Try to keep your credit utilization ratio below 30% across all of your revolving credit accounts, and don’t spend beyond your means. For people with a history of over-spending and debt cycling, I’d honestly prefer you just use one card occasionally, and pay off the whole balance each month, in order to build your credit slowly over time. If even that proves to be too tempting, and you think you might spend beyond your means, stick to a debit card and cash only.
David blogs about personal finance and credit card deals at Credit Card Outlaw.
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