Credit card issuers have been courting customers with renewed vigor this year, dangling $100 checks, bonus miles and zero percent balance transfer offers as enticements to win new business.
While some people find the assault on their mailboxes irritating, others see it as an opportunity.
The incentives “continue to be very juicy,” said Curtis Arnold, founder of the credit card website Cardratings.com. “Start looking at the offers instead of shredding them. Chances are there are much better cards out there than the one you have.”
Card issuers began upping the ante to attract customers a couple of years ago as the country recovered from the financial crisis and credit card default rates began to ease.
After dropping off in 2012 from exceptionally high levels in 2011, credit card direct mail solicitations headed higher again this year, up by 22 percent through June compared with the same time last year, according to the market research company Mintel.
Direct mail offers hit 1.1 billion in the second quarter, the highest level since 1.3 billion in the fourth quarter of 2011, the Mintel data showed.
Over the last few years, card companies also have been using bigger carrots to lure customers, Arnold said.
For example, while sign-up bonuses on airline cards used to top out at around 15,000 to 20,000 points, now it’s not uncommon to see offers of 50,000 points or more – generally enough for two free round-trip tickets in the United States. In some cases, bonus offers have become so attractive that consumers apply for cards just to cash in on the incentives regardless of whether they intend to use the card for the long term.
While the best bonuses are reserved for customers with good to excellent credit, it’s a misconception that applicants have to make big money to qualify, Arnold said. The main determinant is a person’s credit score, not income, he said.
In the last few years, the most coveted card holders have been people who not only have good credit, but also use their cards a lot – charging several thousand dollars or more each month, he said. That way, the card issuer still makes money by collecting transaction fees regardless of whether the card holder is carrying a balance and generating interest income.
For people who carry a revolving balance, card issuers have been aggressively marketing balance-transfer deals with zero percent introductory periods lasting 12 to 18 months.
One caveat is that most of those cards come with a transfer fee of about 3 percent to 4 percent, which works out to $150 to $200 on a $5,000 balance.
“If you can get a no-fee offer with zero percent interest for 12 months, jump on that because it’s pretty rare,” Arnold said.
A report by CardHub.com urges consumers looking for zero percent balance transfer deals to jump in now or risk missing out on the best terms. “Their value has peaked and will worsen before improving again,” CardHub.com said.
To find the best credit card offer, consumers should expand their search beyond what shows up in their mailbox.
Search credit card tracking sites such as cardratings.com, lowcards.com, bankrate.com, creditcards.com and cardtrak.com, and go directly to major issuers’ websites, such as Chase.com, Capitalone.com and Citibank.com.
Although bonus offers can be tempting, experts recommend being selective.
Applying for a card triggers a credit inquiry, which temporarily dings the applicant’s credit rating.
Arnold advises limiting applications to one every six months or so, and to avoid getting a new card before applying for a mortgage.
People who carry balances on their cards, even occasionally, should resist bonus offers and focus instead on finding a card with the lowest interest rate, experts say.
Reward cards typically are a bad deal for people who don’t pay their balance off each month because interest rates on those cards generally are higher than on regular cards.
Revolvers with good credit should be able to find a card with a rate under 10 percent, Arnold said.
People who get so-called preapproved offers in the mail shouldn’t interpret that to mean they’ve already been approved for the card, he said. Preapproved or prescreened offers simply mean the recipient has met certain general demographic and financial criteria. Plenty of preapproved applicants ultimately get turned down.
The industry uses preapproved language as a marketing tool because it increases the response rate.
“The response rate on those offers is like 50 or 60 percent higher than for other offers,” Arnold said. “It’s pretty staggering.”