U.S. Households Get Record 5.23B Credit Card Offers in 2004

U.S. households received an estimated 5.23 billion credit card offers last year, according to Mail Monitor, the direct mail tracking service from Synovate, Arlington Heights, IL.

The total represented a 22 percent increase from 2003 and exceeded the previous mail volume record of 5.01 billion credit card offers in 2001.

Also, in a study of 21,000 consumers interested in loyalty and rewards programs released yesterday, CoolSavings Inc. found that more than two-thirds prefer to receive their rewards as cash instead of merchandise. And 57 percent also want the flexibility of receiving those cash rewards in the form of a debit card they can spend virtually anywhere.

In terms of credit card offers, Andrew Davidson, vice president of competitive tracking services at Synovate's financial services practice, said “along with a modestly improving economy, the prospect of further increases in the prime rate [has] caused issuers to flood U.S. mailboxes with offers in order to make the most of the low-rate environment while it lasts.”

Indications that volumes would hit new heights emerged in the first quarter of 2004 when several major issuers returned to the use of direct mail following cutbacks in 2003, Davidson said.

The percentage of U.S. households getting an offer each month in 2004 remained relatively flat at 71 percent compared with 69 percent in 2003. The average number of offers received by these households each month reached 5.7, or about 68 offers per year per household.

Household penetration peaked at 79 percent in 2001 when issuers extended their offerings to less credit-worthy, or sub-prime, households. The rise in personal bankruptcies and increasing unemployment caused issuers to cut back on these mailings in 2002 and 2003. Despite an upturn in 2004, penetration among these households is nowhere near former levels.

The high level of clutter has caused response rates to drop to an all-time low of 0.4 percent in 2004 from 0.6 percent in 2003, according to Mail Monitor.

“The response rate is low, but the sheer volume of mail solicitations generates millions of applications each month,” Davidson said. “Increasingly, consumers are being encouraged to use the telephone or Internet to apply. However, direct mail is still the key channel when it comes to obtaining the application in the first place.”

Regarding the rewards study, when asked their preference for the “best way to accumulate rewards,” 67 percent chose cash as their ultimate reward, compared with 26 percent who chose points that could be redeemed for merchandise. Miles for travel was preferred by 6 percent, and 1 percent selected tokens for merchandise.

Consumers also want maximum flexibility when redeeming points, with 57 percent selecting a debit card as the “best way to redeem rewards that have been accumulated.” This compares with 28 percent who prefer a gift certificate and 15 percent who prefer a voucher for free groceries. Loyalty and continuity programs comprise a $1.8 billion industry in the United States, with more than 75 percent of consumers participating in a points-based loyalty program.

Consumer demand for cash rewards and flexibility in redeeming them were the two driving forces in the design of FreeStyle Rewards, the new consumer rewards program from CoolSavings.

In the program, shoppers build points toward a FreeStyle Rewards Gift Card by visiting www.freestylerewards.com to buy merchandise and services at more than 175 participating online merchants, including Target, Sears, Kohl's, Office Depot, Avon, Lillian Vernon, Cooking.com, Cabela's, Wilsons Leather, Lenox, Eddie Bauer and CompUSA. The list of merchants is growing weekly and will more than double in the next 45 days, according to CoolSavings, Chicago.

The program awards users up to 20 points for every dollar spent with participating merchants through www.freestylerewards.com. Also, new FreeStyle Rewards members get an introductory bonus of 100 points upon their first qualifying purchase of $25 or more through June 2005.

Melissa Campanelli covers postal news, CRM and database marketing for DM News and DMNews.com. To keep up with the latest developments in these areas, subscribe to our daily and weekly e-mail newsletters by visiting www.dmnews.com/newsletters

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