financial services

Bank of America, Citibank Increase Credit Offers


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.

1 comment about "Bank of America, Citibank Increase Credit Offers ".
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  1. Tresa Lematta, August 7, 2009 at 2 p.m.

    I've been a Citibank customer since 1991. Recently I received a "Change in Terms" letter and leaflet. It stated that as of August 4th, 2009 my minimum variable APR on purchases was increasing to 29.99%!

    They stated: "In order to continue to provide consumers with access to credit, we have had to adjust our pricing. This change is being made as a result of a combination of the economic environment and your account revolving balance and recent payments."

    While I do carry a high balance to credit ratio on my card, I have not been late with my payments and always pay more than the minimum payment required so I was confused as to what would trigger this penalty.

    I called Citibank customer service to ask what balance threshold I would have to be under to avoid this increase. 50% of my limit? 30% of my limit? I was told that there was not threshold and it wouldn't matter how far I paid it down. Citibank was increasing the interest rate across the board for all of their customers regardless of payment history or balance.

    I asked her what kind of feedback she was getting and how well this was going over and she said "not very well, we have a lot of unhappy customers."

    The notice also stated that we as customers have the right to opt out and keep your existing terms which the girl on the phone also told me. However, when you opt out your account is closed.

    I have had this card for almost 20 years. Most people don't realize that credit scoring software looks at several pieces of a credit file to compile a credit score. One of them is the average age of credit. Your credit file age is determined by the oldest card in your file and if you close the oldest credit card account, it looks to the second oldest and your score goes down. This piece is 15 % of the scoring model.

    It's not going to matter what closing my oldest credit card does to my FICO score compared to what 29.99% interest accruing on my balance will do to me financially so I will have to cancel my card and close my account.

    It makes me angry. I have been a good customer for 18 years. A portion of my tax dollars was part of the money that recently bailed out Citibank. I read that they were 1 of the 3 beneficiaries who received the most of the bailout money.

    Our government voted to bail them out. They didn't have to do that. They could have let them fall on their faces. We taxpayers are the people who gave/loaned them the money to stay in business and we are also their customers and they are paying us back like this??? I want to know what kind of bonuses they paid their executives.

    Our Government passes The Credit Card Bill of Rights to protect us from this kind of conduct and Citibank ignores the spirit and intent of the document. They are slapping us both (the Government who voted to bail them out and the taxpayers/customers who's money they received) in the face.

    I have been trying to bring attention to this change by Tweeting news media and various politicians but have not been very successful. Somehow the word must get out.

    Thank you,

    Tresa Lematta

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