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As economy improves, credit offers surge

Consumers tempted, annoyed by mailboxes full of come-ons

By Todd Wallack
Globe Staff / January 14, 2012
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Financial companies are again stuffing mailboxes with credit card applications at a pace not seen since the last recession began four years ago, a sign that banks are relaxing their lending.

Promising everything from cash back to airline miles to zero percent interest for nearly two years, credit card companies mailed out an estimated 4 billion offers nationwide last year, nearly triple the amount delivered in 2009 and the most since 2007, according to Synovate, a unit of French market research firm Ipsos. That’s equivalent to a dozen applications for every man, woman, and child in the United States.

The surge in credit card mailings is another indicator of improving economic conditions and household finances in the United States, which in turn is creating a friendlier environment for borrowers. US banks eased standards for issuing credit cards throughout 2011, according a Federal Reserve survey of loan officers.

That means consumers turned down for credit cards just over a year ago might get them today. TransUnion, a credit rating bureau, said that 54 percent of credit cards were issued to consumers with less than perfect credit in the third quarter of last year, up from 50 percent the previous year.

“It shows a willingness of banks to lend again,’’ said Roy Persson of Synovate.

But the rise in offers is also causing concerns among consumer advocates, who worry that mailboxes stuffed with applications could tempt some people to sign up for too many credit cards and run up high balances.

“I am concerned that people will take on inappropriate amounts of credit or be allowed to do so,’’ said Linda Sherry, director of Consumer Action, an advocacy group in San Francisco. But, she added, “Card companies are under great pressure not to hand out cards to people who can’t pay them back.’’

Credit card offers nearly dried up after the recession, as the financial crisis and housing bust slammed banks, prompting them to frantically look for ways to cut back on risky loans. American Express even offered some card holders $300 to pay off their balances and close their accounts.

But credit card companies have stepped up their marketing efforts again as the economy has started gaining steam, the unemployment rate has declined, and credit card delinquency rates have plunged to the lowest levels in more than a decade.

Chase, for instance, is offering 50,000 bonus points - good toward roughly $625 worth of travel rewards - for signing up for its “Sapphire Preferred Card.’’ Capital One offers 1.5 percent cash back on purchases plus a one-time $100 bonus for its “Cash Credit Card.’’ Citibank is marketing a “Platinum Select MasterCard’’ with zero percent interest for 21 months.

Chase and Citibank were the biggest marketers, accounting for about half of all offers last fall. Both have roughly doubled their mailings in the past year, according to Synovate.

“There is no question that lenders are going back into acquisition mode,’’ said Ezra Becker of TransUnion, one of the largest credit bureaus.

Jonathan Coons of Boston is among the targets. He said he and his wife typically get seven to eight applications a week. But on one recent day, a single mail delivery stuffed his box with seven applications - including two Visas, four American Expresses, and at least one MasterCard.

“It was annoying,’’ said Coons, 29, who works for an e-commerce agency and hasn’t opened a new credit card account in four years. Coons joked that his hands hurt from after tearing so many applications “into tiny unrecognizable pieces.’’

While banks have been willing to accept more customers with blemishes on their credit histories, industry executives say companies are still relatively conservative in issuing cards. The latest data show that consumers receiving credit cards are paying their bills.

Less than 1 percent of borrowers were 90 days or more past due in the third quarter last year - up slightly from the second quarter, but still the second lowest rate in 16 years, according to TransUnion. “It doesn’t mean the banks have opened up the floodgates or they have lost all sense of caution,’’ said Becker, a vice president of research and consulting for TransUnion’s financial services unit.

Consumer revolving debt, mostly from credit cards, inched up for the third straight month in November to nearly $800 billion, according to the Federal Reserve, down from $972 billion in 2008. “People still have to be careful in these hard economic times about taking on debt,’’ said Travis Plunkett, a spokesman for the Consumer Federation of America, an advocacy group in Washington.

Many customers say they are simply tossing the deluge of applications in the trash or recycling bin.

Molly Williams, 50, a homemaker from New London, N.H., guessed she and her husband typically receive 10 offers a week, but they haven’t opened any new accounts. On average, consumers only respond to 4 in 1,000 of the mailings, according to Synovate.

“It’s seems like such a waste,’’ said Williams, noting the paper, postage, and other expenses that go into the mailings. “It’s not just regular paper - it’s heavy paper and sometimes fake plastic cards inside. They obviously went to some trouble to assemble it.’’

Jeff O’Neill, 43, from Medway said he gets a new offer every day telling him he’s prequalified or offering tantalizing rewards. Just this past week, the stock trader got one touting 50,000 rewards points for Ritz-Carlton hotels.

But O’Neill files them all in the trash. He hasn’t opened a new credit card in a year. “I don’t need more credit,’’ O’Neill said. “I’m happy with the credit cards I have.’’

Todd Wallack can be reached at Follow him on Twitter @twallack.

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