How Credit Card Companies Solicit Your Business

We seem to be living in a world where you can’t avoid credit card companies trying to convince you to open an account with them. They will offer you unbelievably low interest rates with seemingly unlimited credit. It is enough to make anyone jump at the chance of signing the paper and starting to charge their purchases.

Credit card companies are fishing in crowded waters. It is reported that on average, U.S. households will receive more than 5 billion offers for credit cards each year. Unfortunately for the companies who are sending out these offers, only about one third of one percent responds to such offers. The rest of the documents get thrown in the trash. To counteract the unsuccessful response rate, marketers are launching advertising campaigns that have become not only more expensive, but also more aggressive.

How They Find Customers

About 90% of marketing conducted through direct mail comes from the top ten credit card issuers. Many of the issuers such as MBA are classified as monolines. This means they don’t have a central or branch office so mailing remains their best option. The average cost of sending these mailings is approximately $80 which includes the cost of administering and marketing to a new customer. Rebates and rewards are offered for approximately half of the offers. Credit card companies are aware that they need to offer more than mere incentives and 0% interest rate in order to keep the new customers they have spent so much to acquire.

Targeting The Customer

The offer you receive will not be the same as the offer someone else in your household may receive. Marketers are zeroing in on a person’s gender as well as their spending habits. These companies can gather information about prospective customers from a number of sources where hardly anything an individual does remains private nowadays. When companies started charging differing interest rates according to a consumer’s credit history, monolines took advantage of this. They began offering a card at a lower percentage rate than the person had been previously offered.

What spurred this wide range of marketing was the use of “attributes” to classify and target specific consumers. This practice started late in the 1970s when national credit bureaus were practically nonexistent. They used to gather information from public records such as new home ownership, marriage licenses and gas credit cards to target individuals who might be qualified to obtain credit.

When the information age boomed in the 1990s, more information was available that could be culled from databases to determine potential customers. Credit card companies used this information to create even more refined marketing systems in order to attract the right customers.

Research indicated that at least 25 million households in America didn’t possess a credit card during the 1990s. Consequently, the issuers targeted these individuals aggressively to solicit their business. They then charged their customers high fees and high interest and offered credit to millions of people who weren’t equipped to deal with a large amount of debt. Unfortunately, that was a mistake that continues to haunts the credit card industry to this day.