• by Karlene Lukovitz  @KLmarketdaily, February 18, 2008

Taking cover in response to the mortgage crisis, credit card issuers cut their direct mailings by nearly 216,000 pieces--or 14%--in last year's fourth quarter, according to Mail Monitor, Synovate's direct mail-tracking service. The issuers' total mail dropped to 1.3 billion pieces for the period, compared to 1.5 billion in fourth-quarter '06.

For full-year 2007, issuers' mail levels dropped to 5.2 billion, down nearly 10% from 2006's 5.8 billion.

In fourth-quarter '07, the biggest volume cuts were made by Washington Mutual (-73%), Citibank (-52%), Discover (-50%) and HSBC (-34%). All four issuers were also down as compared to third-quarter '07 volumes: WaMu, -67%; Citibank, -32%; and Discover and HSBC each down 25%.

Washington Mutual and HSBC, in particular, targeted subprime customers, while Citibank and Discover have both experienced financial difficulties resulting from the mortgage crisis, points out Andrew Davidson, vice president/competitive tracking services for Synovate's Financial Services Group.

Meanwhile, Chase--which limited its exposure to the mortgage meltdown and has been seeing better financials than its competitors--is leveraging the opportunity for all it's worth.

Chase upped its mailed offers by 62% in the fourth quarter, and was the largest-volume credit card mailer for both the quarter and the full year. (Despite a 7% volume cut in the fourth quarter, Bank of America was the second-largest credit card mailer for full-year '07).

In fact, one in four mail offers now received is from Chase, and a typical household receives two or more Chase offers each month, "at a time when its key competitors are pulling back," notes Davidson.

American Express is also jumping in full force: It upped its mail volume by 27% in the fourth quarter, making it the period's second-largest credit card mailer. Amex appears to be increasing acquisition efforts in response to recent declines in monthly spending by existing customers.

"Obviously, for as long as Chase and Amex continue to increase their volumes as their competitors drop back, they will be taking a higher share of new card applicants," says Davidson.

Big card issuers are also being somewhat more selective about who they target, pulling back from lower-income households. In fourth-quarter '07, 57% of households with incomes under $35,000 still received offers, but that was down from 67% in fourth-quarter '06.

Furthermore, issuers are tightening their terms. Although the prime rate dropped by 1% during the quarter, the single/go-to APR on variable-rate offers increased to 13.96%, from 13.48% in 4Q '06, "suggesting a more cautious approach than seen previously," says Davidson.

What will 2008 bring? After tracking the card issuers' mailing patterns for more than 20 years, Mail Monitor has identified strong cyclical trends.

"Mailings generally grow for two to three years, then dip for a couple of years," although the reasons for the dips vary, explains Davidson. There were dips in 1999 and 2002 to 2003, so a 2006 to 2007 dip was more or less predictable, and the next upswing would be expected during this year, he says.

The current mortgage crisis and economic downturn could conceivably delay the expected 2008 upswing for a year, but given that direct mail still accounts for more than half of all new card-member acquisition, a rebound in volumes is inevitable, he says.

Card issuers are also likely to continue tightened terms for the short term, in the face of governmental scrutiny of lending practices, as well as their current financial exposure. "But by maybe 2009, they will begin competing more aggressively on price again," Davidson predicts.