Tag Archives: chase

U.S. Issuers Continue to Push Small Business Card Spending With Bonus Offers

In spite of the stuttering economic recovery, leading U.S. card issuers appear united in their belief that there is significant growth potential in small business cards. Given the anemic small business loan demand as well as continued strict underwriting standards from issuers, issuer focus continues to be on driving small business spending rather than outstandings.  This is illustrated most clearly in the bonus points/miles/cashback offers for making initial purchases on new cards as well as for signing up for a number of services.

  • Chase is offering bonuses on each of its three Chase Ink cards: up to $250 on Ink Cash; up to 25,000 bonus points on Ink Classic; and up to 50,000 points on its Ink Bold charge card.
  • Capital One has professed that it does not typically compete with strong bonus offers or introductory rates, but it is offering 10,000 miles on the Spark Miles credit card.  This card is targeted at heavy spenders, and features an earn rate of two miles per dollar, but it also carries an annual fee of $59.  Capital One is also offering 30,000 points for customers who sign up for Capital One Personal Checking account, Small Business Rewards Checking account and Spark Business credit card.
  • SunTrust is offering 25,000 points on its Delta SkyMiles Business Check Card.  This card has a rewards earn rate of 1 mile per 2 dollars, and comes with a $120 annual fee.
  • Citibank, who pulled back significantly from the small business space between 2008 and 2010, recently launched the CitiBusiness ThankYou Card, featuring 15,000 bonus ThankYou Points after spending $3,000 in the first 3 months.

These offers can be effective in driving new small business cardholder and acquisition.  However, to optimize customer lifetime value, issuers also need to develop initiatives that anticipate and capture opportunities at various stages of the customer lifecycle.  These initiatives include onboarding campaigns, anniversary communications and offers, ongoing usage incentives, upsell and cross-sell initiatives, winback programs and referral offers.

U.S. Credit Card Issuer Emphasis on More Affluent Consumers Reflected in Latest Outstandings

The latest quarterly regulatory filings from some of the leading U.S. credit card issuers reveal that outstandings held by cardholders with higher FICO scores are accounting for an increasing share of total credit card portfolios. Over the past year, there has been ample evidence of issuers targeting more affluent consumers with new products and aggressive offers, while continuing to maintain high underwriting standards.

Although these issuers do not use the same FICO-score categories, the following charts show that all issuers reported continued declines in outstandings held by cardholders with lower FICOs (below 660), while oustandings for cardholders with higher FICOs either had smaller declines or in fact grew over the past year.

  • Chase: Overall, there was no change in Chase end-of-period (EOP) credit card outstandings between 1Q11 and 1Q12. However, cardholders with FICOs of 660+ (which accounted for 82% of total outstandings in 1Q12) rose 4%, while outstandings with FICOs below 660 fell by 15%.

  • Discover uses the same FICO categorization as Chase. It reported a 4% total rise in EOP card outstandings between 1Q11 and 1Q12. FICOs of 660+ rose 10%, while FICOs <660 fell 18%. FICOs of 660+ accounted for 81% of total Discover credit card outstandings at the end of 1Q12, just below the rate for Chase.

  • Bank of America uses different FICO categories, with a cut-off point at 620. Total outstandings fell 10% y/y to the end of 1Q12, but the decline in FICOs below 620 (-41%) was much higher than that for FICOs of 620+ (-6%). FICOs of 620+ now account for 92% of total outstandings, compared to 88% in 1Q11.

  • Like Bank of America, Citibank’s total EOP U.S. credit card outstandings fell y/y (by 4%), and there were declines in all FICO categories, but again higher FICOs reported lower declines. At Citi, FICOs of 620+ now represent 91% of total outstandings, up from 85% at the end of 1Q11.

  • Unlike other issuers, Wells Fargo provides a wide range of FICO categories, which have been summarized into three categories below. Total Wells Fargo credit card outstandings rose 4% y/y, but there was an 11% decline among sub-prime FICOs below 600. For FICOs of 760+, outstandings rose 16% and now represent 25% of outstandings, up from 23% in 1Q11.

Credit Card Lines for Leading Issuers Highlights Continued Deleveraging

Recent regulatory filings from some of the leading U.S. credit card issuers reveal ongoing declines in available credit card lines.

Although the three issuers in the above table all reported credit card line reductions between March 31, 2011 and March 31, 2012, there are some variations among these issuers.

  • Chase’s credit card lines fell 6% during this period, but rose in the two most recent quarters, increasing 1% between the end of 2011 and the end of 1Q12.
  • Citigroup is the only issuer among the three to report U.S.-only credit card lines, which fell 8% between 1Q11 and 1Q12.  However, like Chase, this decline appears to have bottomed out, with virtually no change in the most recent quarter.
  • Bank of America reported the strongest decline among the leading issuers, falling 11% between 1Q11 and 1Q12.  This represents a continuation of a process of retrenchment that has been in place since the start of the financial crisis.  Between end-2008 and end-2011, Bank of America’s credit cards lines fell by 46%.  There are some signs that this decline is tailing off, with a fall of only 1.7% in the most recent quarter.

Indications that the significant reductions in credit card lines are bottoming out provide evidence to support industry expectations that card outstandings will grow slightly in 2012.