Perhaps a sign that the economic doom is lifting, U.S. households are starting to receive more credit card offers from certain banks. Card mailers that ramped up their mail volumes in the second quarter this year included Bank of America (77% more than the first quarter) and Citibank (up 65%), according to Synovate's Mail Monitor, a credit card direct mail tracking service .
Overall, 349.1 million credit card offers were extended during the quarter -- a 67% drop from the 1.06 billion offers received during the same quarter of 2008, but only a 6% drop from the 372.4 million offers received during the first quarter of this year.
"We are seeing mailed credit card offers bottoming out and anticipate that there will be an uptick next year," says Anuj Shahani, director of competitive tracking services for Synovate's financial services group. "Apart from those issuers that increased their mail volumes this quarter, we are seeing almost all issuers either mail somewhat less or somewhat higher, albeit from extremely depressed levels. This is giving credence to the now universal mantra: Less bad is the new good."
For starters, issuers are no longer risk-averse. "While the economy starts getting back on its feet, issuers are getting creative and tweaking their product mixes to adapt to the new regulated environment," Shahani says. "We saw certain types of card offers resurface this past quarter, showing that issuers are starting those jammed credit engines once again."
Every single offer mailed during the second quarter had a variable APR associated with it, compared to 60% of the offers in the same period a year ago. As the Federal Reserve Board eventually moves away from quantitative easing, (when the central bank floods the market with cash to help stimulate the economy) and starts increasing the rates, it will have zero impact on the issuers, Shahani says.
"Issuers are capitalizing on the lowest levels in the prime rate and have locked in an average of more than 8% of every dollar in new debt that they can attract on their credit card," Shahani says. "This huge margin may be instrumental in causing the issuers to push the credit gas pedal again."
While there may be more offers arriving, banks are being pickier about who they close the deal with. Applicants are being asked to jump through more hoops to get credit, such as sending copies of their pay stubs or bank account statements. And those who are approved are facing higher rates and fees and smaller credit lines.
The recently passed Credit Card Act of 2009 is forcing the industry to limit fluctuating interest rates, and bans some controversial practices. Banks have until February to comply with the act's key provisions, although some new requirements have earlier deadlines. Beginning this month, issuers have to mail bills at least 21 days before the due date and provide at least 45 days' notice before changing any significant terms on a card.