Credit Card Solicitations

During 2000, credit card issuers mailed out a record 3.54 billion solicitations for credit cards, up 22.3 percent from last year's 2.87 billion mailings. According to the surveys of BAIGlobal, the record low response rate of 0.6 percent represented a significant decline from last year's response rate of one percent. Andrew Davidson, president of the firm's competitive tracking services, attributed the low response rate in part to the fact that three-fourths of households already have at least one general-purpose credit card, with average holdings of 2.4 cards. He told The Wall Street Journal, "Going forward, issuers really need to break through the clutter and offer something compelling to get a response." About a fourth of credit card offerings carried a rate exceeding 19 percent, suggesting increased interest in marketing card products in the sub-prime market.

Given the steady decline in response rates to direct mail solicitations, the Internet is becoming an attractive way for issuers to obtain new customers. A new study from Atlanta-based Brittain Associates found that card issuers opened 4 million new accounts online in 2000. More than 13 million new credit card accounts have been opened online since 1996. Bruce Brittain told Cardline that issuers spend, on average, $106 per new account opened via direct mail vs. $60 to $70 via the Internet. A report by Gomez Advisors (Needham, MA), an Internet consulting firm, estimates that 28 million credit card accounts will be obtained online by 2005. Most of these will be opened by Internet "boutique" sites such as NextCard Inc. and Jupiter Bank.

One new entrant to the online card marketing business is CardClues.com. Founded by card industry consultant S. Jeffrey Baxter, the site lets consumers search for credit products that meet the criteria they select. Six of the top 15 credit card issuers offer cards through the site, which is in the process of signing agreements with popular Web portals to offer search services. The site asks visitors questions about their affinity ties, desired rewards programs and a series of questions which gauge credit worthiness. Issuers pay a fee for each approved application routed to them through the site. Although Baxter believes there will be growing consumer interest in online card shopping, other industry experts doubt that the "shopping" segment will ever be large. James Punishill, an analyst with Forrester Research (Cambridge, MA) told the American Banker, "most people don't think about it. When was the last time you called up a bank and asked them what their credit card rate is? People shop mortgages, mutual funds but they just don't shop credit cards. The world is stacked against them."