As the lessons learned from the near-collapse of the financial system continue to spread, consumers are feeling the repercussions from the credit card industry. Between June of 2009 and February of 2010, the number of consumers who do not have a credit card grew 52.6%. Currently, nearly 1 in 3 consumers do not have credit cards.
This change is largely the result of credit card companies contending with new legislation designed to curb abuses. In addition, marketing practices are changing. Instead of mailing consumers offers for new credit cards, companies are using direct mail to communicate revised features:
- Incentives offered to close cards 8%
- Rate changes to variable from fixed 13%
- Credit limits decreased 12%
- Annual percentage rates increased 38%
The general tightening of the credit markets has led consumers to decrease their use of revolving credit by 13.9%. The amount of revolving credit outstanding recently dropped from $957.3 billion to $866 billion.
Likewise, credit card companies are being more cautious about who they target with their best deals. In February of this year, only 30% of consumers were notified that their credit limit had been increased. This marked a drop from 33% in June 2009.
The new legislation that went into effect on February 22, the Credit CARD Act, may also affect how credit card companies establish affinity relationships with colleges and universities. Because of these business arrangements, credit card companies had been given contact information on students and alumni along with opportunities to run promotional events on campus. As these practices come under scrutiny, card companies may have to find new sources of contact information for potential new cardholders.
The changes in the financial markets and the new legislation are both prodding credit card companies to find new ways to market their services and to find new ways to generate income.[Sources: MacDonald, Jay. Once secret credit card-college marketing deals to be revealed, CreditCards.com, 2.25.10; Credit Card Popularity Drops, MarketingCharts.com, February 2010]