Credit Card Offers Just May Be A Good Sign

PERSONAL FINANCE

Banks Increasing Their Solicitations Hints At Improved Economy

August 11, 2009|By EILEEN AMBROSE

Could a sign of economic recovery be in your mailbox?

Synovate, which tracks credit card solicitations, reported last week that card offers mailed to consumers dropped about 6 percent from the first to second quarter this year, a far milder decline than in recent quarters. And some big issuers, such as Bank of America and Citibank, have actually increased their offerings.

"That's the flattening out or bottoming out," says Anuj Shahani, director of competitive tracking services with Synovate's financial services group.

Of course, card issuers are still stingy with credit and picky about to whom they send offers. Shahani says only the most credit-worthy consumers with FICO credit scores of 700 and higher are getting offers. And even if you're among this select group, you'll likely notice one change: no more fixed-rate cards.

Meanwhile, everyone else with a credit card might soon see other changes when some provisions of the new credit card reform law kick in Aug. 20.

It was only a year ago in the second quarter when card issuers stuffed 1.06 billion offers in consumer mailboxes, according to Synovate. Since then, issuers overall have reduced their mailings by double-digit percentages from quarter to quarter, including a 44 percent drop between late last year and the first quarter this year.

In the second quarter ended June 30, total mailings reached 349.1 million, a 6.2 percent drop from the first quarter, Synovate says.

Yet some major issuers ramped up offers. Bank of America sent out 55.2 million mailings in the second quarter, up 77 percent from the first quarter, according to Synovate. Citibank increased its mailings by 65 percent to 56.1 million.

Card issuers don't want to go too far out on a limb, Shahani says, but they don't want to be the last to extend credit, either.

"Otherwise, someone else will get in and take customers away," he says.

Most solicitations also occurred late in the second quarter, another sign that issuers may be overcoming a reluctance to extend credit, Shahani says.

But don't expect an industry-wide uptick in offers until next year, he says.

If you do get card solicitations, they won't be for a fixed-rate card.

"They are a dying breed," says Curtis Arnold, founder of CardRatings.com that tracks cards.

Arnold says much of that has to do with credit card reform legislation that was signed into law in May.

Card issuers have had great leeway to change a fixed rate with little notice. Credit card reforms will only allow issuers to claim a card has a fixed rate if it can't be changed for a certain period that's clearly spelled out, he says. Card issuers, worried of running afoul of the new law, are sticking with variable rate cards, he says.

Most card reforms kick in in February. But two provisions take effect next week.

The first requires card companies to mail bills at least 21 days before payment is due, instead of the 14 days that's become the norm for some issuers.

The second requires card issuers to give 45 days' notice before raising your interest rate or significantly changing card terms. (No notice is necessary if the rate on a variable interest card goes up because its benchmark rate has risen.)

Consumers often complain about the short time they have to mail in their payments, so the extra week will be helpful, says John Ulzheimer, president of consumer education for Credit.com.

But the 45-day notice provision likely will have little impact because consumers tend to ignore notices anyway, he adds.

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