Competition In The Credit Industry Picking Up As Credit Crisis Eases

Credit card companies are now beginning to get more confident of the credit market now that defaults are beginning to ease up and consumers are focusing more on eliminating their credit card debt. This is readily seen in the current resurgence of credit card mail marketing from the major credit card companies.

Two of the largest credit card companies in the U.S. have stepped up their marketing activities. JPMorgan Chase & Co. and American Express Co. have increased their credit card mail offers in a bid to make their credit cards the number one credit card in every consumer’s wallet.

In October, JPMorgan more than doubled their credit card mail offers compared to its September volume, making it the top company in terms of credit card mail offer volume. JPMorgan’s main credit card mail promotional efforts was for its new line of Sapphire credit cards which is aimed at the top 15% of consumers, ranked by income.

American Express, the biggest credit card company in the U.S. in terms of purchase volume, also stepped up its promotions for its line of credit and charge cards. The company is competing aggressively with JPMorgan Chase in pursuing the more affluent customers out there.

The two companies make up two out of five credit card mail offers being sent out to mailboxes. Not only that, both companies have also been advertising heavily in television and newspapers as well. American Express increased spending from the second quarter to the third quarter by $150 million for its marketing and advertising initiatives. It also expects to continue its marketing investments as loan losses continue to decline.

It’s not only the big credit card companies that are making a bid for the wallets of consumers, especially the affluent ones. Smaller credit card companies are also beginning to offer more credit cards. HSBC, a relatively small player in the credit card industry, was hurt badly due to its subprime borrower exposure. The company has just increased its credit card mail offers by 50% from September to October. Another credit card company, U.S. Bancorp has also doubled its promotions.

Credit card companies are going to have a tough time selling credit cards to consumers, however. In the past few months, they have been raising interest rates, cutting credit limits and slashing rewards programs in an effort to cushion their losses and also as preparation for the upcoming new credit card legislations. There are already indications that these moves have backfired at them. Consumers are getting disenchanted with credit cards as evidenced by the massive movement towards debit cards and the preference of consumers for cash for their holiday spending. Consumers may be more interested in cutting down their number of credit cards to one or eliminating them altogether.

Mintel Comperemedia senior vice president, Andrew Davidson said, “You are fighting for market share. It’s all about being the No. 1 card in the wallet. The battle will intensify because you will only use one or two cards with the fee. You are not going to have four or five cards”.