Credit laws force new marketing approach

Card-issuing companies now must give consumers 45 days’ notice if they change interest rates or most fees or agreement terms, according to the Credit Card Accountability, Responsibility and Disclosure (CARD) Act. The law, which went into effect February 22, also changes how interest rates and payments are applied to balances and mandates that consumers under 21-years-old need a co-signer or proof of income.

Andrew Davidson, SVP of Mintel Comperemedia, which tracks direct mail advertising, says card issuers are increasing their mailings after some apprehension about the law.

“Companies up to this point have been holding back a bit as they figure out their marketing strategy as it relates to this act,” he says. “But we’re seeing a steady increase, and we think this is going to be an ongoing trend throughout the year.”

Mintel observed a 47% increase in credit card direct mail in the fourth quarter of last year. It was the first increase in three years, although the total amount of credit card-related mail pieces is considerably lower than in the days before the recession.

“Direct mail has always been the number one channel for credit card issuers to acquire new customers,” says Davidson. “They’ve always had to navigate the channel effectively and this is no different.”

Credit-related direct mail may have increased noticably late last year. However, the total number of mailed credit card offers sent in 2009 was 66% less than the year before.

Last year’s total of credit card mailings was below 2 billion, far less than the annual amount of 7 billion the category saw from 2004 through 2007, Mintel reports. Experts have said that the amount of credit card direct mail may never reach 2008’s numbers, but there will be a consistent rise in the category this year.

Dave Frankland, principal analyst at Forrester Research, explains that the law also requires companies to be clearer in their messaging to consumers.

“Seeing a big ‘0% Interest’ on an envelope and then opening it up to realize that after an initial period, the interest is hiked up to 21%, for example, will be decreasing,” he says. “There will be more plain language and less misleading and deceptive wording. Everyone’s going to take a big step back and evaluate their practices.”

The legislation, and the sluggish economy, are also spurring credit card companies to use more accurate customer data, according to Frankland.

“Going forward, these direct mail campaigns are going to be focusing on data like age and credit-worthiness,” he says. “Unlike age, credit-worthiness is not a constant.”

It will also be more difficult for creditors to switch interest rates to reflect credit scores in the time between when they get scores from bureaus and when a direct mail piece is sent. That process generally takes one to three months.

“Now this will be much harder to do,” Frankland says. “So keeping the data clean is that much more important.”

While card issuers are spending more on direct mail, they’re also more cognizant of the fact that consumers are spending more conservatively and on items deemed necessities, says Davidson.

“The big theme is ‘getting more for less,'” he says. “There are more offers out there like more rewards for spending in certain categories like gas, groceries and everyday rewards. We’re also seeing cash-back programs that feed into a mortgage or savings account.”

Credit card issuers will also use a more obvious mix of marketing channels in coming months, Davidson continues. Traditional channels will be supplemented by TV and online efforts.

“We’re going to see more integration between TV, e-mail marketing and banner ads than in the past,” he says. l

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