US credit card issuers compete for new business
Credit card lenders have stepped up marketing efforts to lure new borrowers, showing confidence in U.S. consumers even as the economy could tip into a recession.
The volume of paper and digital mail solicitations increased for the second consecutive quarter, after rising 47% in the first quarter, according to the Financial Times report Sunday (July 31).
It could reach a new high this year, as there was an 85% increase from levels seen in 2020. Issuers around the world said they were allocating more to marketing spend, according to the report.
JP Morgan Chase, the largest card issuer in the United States, recently showed how fierce the competition is for borrowers, blaming higher customer acquisition costs for a 45% drop in card profits in second trimester.
Meanwhile, Capital One, the second-largest U.S. issuer, said its quarterly marketing spend rose 62% from the same period last year. The bank said it would continue to be aggressive.
This increase in activity is “remarkable” due to the economic situation, according to the report, as lenders generally send fewer card offers when things look uncertain. Usually at these times there is also more emphasis on selling premium cards and offering deals to existing customers.
But now lenders think they have room to bolster the size of their loan portfolios, with low unemployment and seemingly healthy consumer balance sheets.
Meanwhile, the Federal Reserve continues to raise interest rates to help reduce inflation. The economy has been in flux for some time, with various factors – including the lingering effects of the pandemic and the Russian-Ukrainian war – making things much more dire for many people.
See also: GDP contracts again, triggering new recession anxiety
PYMNTS recently wrote that the US economy has contracted for the second consecutive quarter, which is a typical sign of a recession. However, economists disagree on what will be considered a concrete mark of such a collapse, as the pandemic has altered a number of factors.
According to a report from the Bureau of Economic Analysis, inflation hit a new four-decade high in the second quarter and consumer spending slowed slightly.