Credit card companies are sweetening the
pot with cold hard cash to attract new customers, according to Mintel Comperemedia.
Competition is always fierce in the credit card industry, and these days, issuers are working hard to grab
people's attention in an increasingly crowded mailbox. According to Chicago-based Mintel Comperemedia, cash in particular is becoming the enticement of choice, as 23% of credit card offers in
January-April 2011 included an additional cash incentive, compared to just 1% during the same period in 2007, says Andrew Davidson, senior vice president, Mintel Comperemedia.
Fifty-nine percent
of offers for new credit cards in the first four months of the year promoted some form of additional incentive to encourage potential applicants to sign up for a card, compared to 30% during the same
period in 2007. Despite the growth of cash, miles and points are still the most popular incentive. Twenty-five percent of offers during January-April 2011 lured potential customers with bonus miles or
points.
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An additional cash incentive, usually triggered upon first purchase or once a cardholder spends a specific amount on the card, has been popular in the competitive cash-back card
segment, Davidson says. "However, we are now seeing cash used as an additional incentive for some mileage cards, as well as cards without rewards," Davidson says.
Chase has been setting the pace
by offering $300 as a cash incentive in some offers for its Freedom card and 100,000 bonus miles in offers for its British Airways Visa Signature card, which is enough for two transatlantic round-trip
tickets, or four domestic round-trip tickets.
Bank of America, in an effort to compete with Chase and Discover, recently added a $100 cash reward bonus in its offers to existing bank customers
for the BankAmericard Cash Rewards credit card. Offers pitch the bonus as a "thank you" to existing customers for their business. Citi has been ramping up the marketing of $100 in "bonus cash back" as
an incentive for its Citi Dividend Platinum Select MasterCard. The customers qualify if they spend $500 during the first three months of owning the card.
In an effort not to be outdone, some
issuers are increasing the number of bonus miles or points promoted in their offers. American Express Premier Rewards Gold card customers get 75,000 points after they sign up and spend $500 on the
card and an additional 15,000 points after spending $30,000, for a total 90,000 points in the first year. Offers persuade frequent fliers by posing the question: "There's more than one airline flying
out of JFK airport. Shouldn't you be earning triple miles on all of them?"
In some cases, the incentive is so attractive that consumers may as well apply for a card to cash in on its incentive
regardless of whether they have any serious intent to use the card in the long term, Davidson says. "The challenge for issuers will be getting these incentive-driven switchers to change their spending
behavior and become loyal cardholders," he says.