As more consumers focus on debt reduction, creditors eye wealthier customers

10.04.09
By Timothy Jones

Facing a mix of pending government reforms and a general population that is increasingly focused on debt reduction, more card companies are said to be eyeing wealthy consumers as a way to boost their profit margins.

Recent figures from Mintel Comperemedia find that in the second quarter of 2009, card companies sent out 28 percent more offers for premium cards than they did in the first quarter. During that time, overall credit card offers still declined by 8 percent.

The company also noted that in the first half of 2009, premium card offers represented 19 percent of total credit card direct mail campaigns, compared to 9 percent in the first half of 2008.

"Credit card companies are competing to attract people with high credit scores and big spending habits. Because premium credit cards often have high associated fees and low risk, issuers see them as an excellent way to restore profitability in today's economy," said Andrew Davidson of Mintel.

Davidson also went on to predict that this is probably the start of a renewed trend by card companies to offer more credit in general - one that will eventually start to benefit all consumers again.

Throughout the recession, companies have scaled back their lending to most consumers who lack a sufficiently high credit score. However, consumers have also been learning to increasingly make do without their credit cards, as evidenced by monthly government reports showing more debt being paid down, as well as the increasing popularity of debit cards.

Government reforms that will take effect in the coming months are also motivating credit companies to focus more on high-income consumers. This is because as companies become less able to rely on late fees and punitive interest rates and as consumers remain focused on debt reduction, lenders will need to focus on options like annual fees to boost their profit margins.

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High-end customers are one way for credit card companies to preserve their profits.