by Bill Hardekopf
As the economy recovers, households are receiving substantially more credit card offers in the mail.
During the first quarter of 2010, US households received 481.3 million credit card offers, a 29% increase from the 372.4 million offers mailed during the same period a year ago, according to the latest study by Synovate Mail Monitor. Some credit card issuers, such as Capital One and HSBC, more than doubled their mail offers during this quarter versus the prior quarter.
While the total offers represent a substantial increase over recent volume, the figures are far below the record 1.58 billion pieces sent in the third quarter of 2005.
Direct mail is an expensive advertising vehicle, and since credit card issuers are investing more money in this area, it is a significant sign that business is turning around for them. While this is a good sign for credit card issuers, many households would probably rather avoid the return of unsolicited credit card offers.
The study shows direct mail offers are also becoming more widespread for soliciting new debt as more issuers offer attractive introductory interest rates. 65% of the total offers mailed in the first quarter had an introductory purchase APR compared to just 58% in the final quarter of 2009.
How Issuers Find Your Information
Even if you don't want a new credit card but you have a good credit score, issuers are determined to get an offer in front of you any way that they can. Since direct mail is successful, they will buy lists of names and addresses.
Many businesses and non-profits that require your name and address may sell your information to a creditor for their own revenue. Credit card issuers buy the names and addresses.
They usually don't cross-reference these lists to see if you are under 21, alive, or even human. That is why you have instances of children and even pets getting a credit card offer.
Credit bureaus can also sell your name and address to lenders and direct marketers. If you get a pre-screened/pre-approved loan offer, you have already met some of the criteria that the issuer submitted when it purchased a list of eligible borrowers from the credit reporting bureaus. Credit bureaus do not release specific information on a consumer but provide lists based on consumer characteristics. The CARD Act does require lenders to exclude anyone who is under the age of 21 from the pre-screened list.
In the past, some colleges and universities shared their alumni lists with banks as part of affinity credit card programs. This proved to be a substantial fundraiser for schools. Most lists targeted alumni and excluded current students.
If You Are Interested in the Offer:
- Read the terms and conditions carefully. Know how long the grace period is. Look at all of the fees--annual fee, late fee, balance transfer fee, cash advance fee, and especially if you travel a great deal, the foreign transaction fee.
- Look at the range of APRs in the terms and conditions. If you have average credit, you probably won't qualify for the lowest rate. Remember that these rates are variable and will increase if the Federal Reserve raises interest rates. If it has an introductory rate, know what interest rate you will pay once this intro period ends.
- Compare the offer with other cards. The bold print may say the offer is a great deal, but that doesn't mean it is the best credit card for you. The LowCards Complete Credit Card Index compares interest rates, grace periods and annual fees for over 1,000 credit cards.
- If you don't want the card, shred the application and throw it away.
How to Reduce the Solicitations
If you have a good credit score and good payment history, it is difficult to stop the banks from courting you. But you can put a stop to some of the direct mail.
The credit bureaus offer a toll-free number that enables you to "opt-out" of having pre-approved credit offers sent to you for five years. Call 1-888-5-OPTOUT (567-8688) or visit www.optoutprescreen.com for more information. When you call, you'll be asked for personal information, including your home telephone number, your name, and your social security number. The bureaus will keep your information confidential and will use it only to process your request to opt out of receiving pre-screened offers of credit.
You can also send a letter to the three major credit bureaus (Experian, TransUnion, Equifax) to notify them that you don't want your personal information distributed for promotional purposes.
Bill Hardekopf is CEO of LowCards.com, a site dedicated to simplifying the confusion of shopping for credit cards. It is a free, independent website that helps consumers easily compare credit cards in a variety of categories, such as lowest rates, rewards, rebates, balance transfers and lowest introductory rates. It also gives an unbiased ranking and review for each card.